European Business Review (EBR) / 2-2012

Special Report:

EBS 2012 Skills for Growth

Opinion:

Democracy VS. The eurozone

ISSUE 2 - 2012 / YEAR 16th • PRICE € 5,00

Time to Turn the crisis into

a challenge

Trends:

Demystifying social media

www.europeanbusinessreview.eu

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Founder Konstantinos C. Trikoukis

Chairman Athanase Papandropoulos

Publisher Christos K. Trikoukis

Editor in Chief N. Peter Kramer

Editorial Consultant Anthi Louka Trikouki

Issue Contributors Daniel Gros Robert D. Kaplan Rafael Van Oppen Ardanaz Daniel Guéguen Adréa Pavon Guinéa Paul Haydon Francesco Guarascio Michael D. Tanner Thomas Fricke* Robert J. Shiller Dr. David Landsman Harris D. Vourkas Roxane Divol David Edelman Hugo Sarrazin Miroslaw Krzanik Annika Ahtonen Francis Fukuyama

Correspondents Brussels, London, New York, Paris, Berlin, Istanbul, Athens, Helsinki, Rome, Prague

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Commercial Director Vasilis Papadakis

Public Relations Margarita Mertiri

Financial Consultant Theodoros Vlassopoulos

Skills for Growth - EBS 2012

Art Direction ONETEAM S.A.

PUBLISHED BY:

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EMG Strategic Communications Ltd. 38 Princes Court, 88 Brompton Road, Knightsbridge SW3 1ES, London United Kingdom T: +44 (0) 20 3582 7381 www.emgcommunications.co.uk Athens office 23 Vas. Sofias Avenue, 10674 Athens - Greece T: +30 210 6617452 Fax: +30 210 6617453 ISSUE 2 - 2012 / YEAR 16th

Europe ignoring geopolitical flashpoint of South China Sea

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Russians Back Political Freedom and Putin Too

08 A BRUSSEL’S VIEW

Editorial, by N. Peter Kramer, editor in chief

10 OPINIONS

Democracy vs. the Eurozone Do they represent us?

16 european affairs

A Taiwan – EU Economic Cooperation Agreement would unlock dynamic gains Concerns over the EU legal order Europe also influences on education!

24 geopolitics

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Taming the Dragon: China and EU in Africa Europe ignoring geopolitical flashpoint of South China Sea Russians Back Political Freedom and Putin Too

France’s Economy is Doing All Right, Thanks!

30 economic outlook

Europe’s Failed ‘Austerity’

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34 special report

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Skills for Growth - EBS 2012

42 interview

Lena Mamidaki, MAMIDOIL JETOIL S.A. - Marketing and Communications Director

44 management

Investors want CEOs to engage in EU Policy debate

Demystifying social media

Financial Capitalism

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Financial Capitalism

48 shipping

The path to European recovery

50 leadership

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Forget What You Know, Remember What You Should Have...

54 trends

Demystifying social media

66 LAST PAGE For previous editions archive and up-to-date information on major topics and events you may visit our website http://www.europeanbusinessreview.eu

Democracy vs. the Eurozone

7 offers Europe alsoEUROPEANBUSINESSREVIEW EU still ‘tremendous influences on opportunities’ education! for US

Editorial

EU Presidency under Russian influence...

In Brussels great gnashing of teeth. Greek-Cyprus, holding the rotating EU Presidency in the second half of this year, is coming more and more under the influence of Russia and is looking officially now for EU rescue funds to shore up the country’s banking sector. But it is still in talks with Russia about a loan to help shore up its bloated and overstretched public finances.

By N. Peter Kramer

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fter Russia last year gave the island state a three-year loan of €2.5 billion at a below-market rate 4.5%, the government is now trying to get a new €5 billion loan from Russia. This loan is the favoured option, since it would come with fewer conditions than an EU bailout. One analyst in Brussels noted that if a second

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Russian loan will be accepted, nearly two-thirds of its GDP could potentially be in thrall to Russian lenders.

What’s behind this Russian kindness?

Will Russia ask for a stake in the large reserves of natural gas recently discovered in Cypriot waters in the Mediterranean? That would certainly upset the anti-Russia clan in the European institutions. They claim the Cypriot gas as European in order to offset EU energy dependence on Russia. There are fears in the EU palaces in Brussels that by turning too much to Russia, Greek-Cyprus could become a vassal of the Kremlin.

Added to this President Demetris Christofias is a keen ally of Russian President Vladimir Putin and the only Communist leader in the European Union. He was one of the few European leaders to support Russia when Georgia attacked it. He backed Moscow in critisising a proposed US missile defence system in former communist East-European countries. On a trip to Moscow, Christofias called himself ‘the red sheep of Europe’ and in fluent Russian. He studied at university in Moscow and is no exception, many Greek-Cypriots studied in Russia during Soviet times and marriages between

Greek-Cypriots and Russians are commonplace. Christofias lambasted recently the European Union saying that the European Commission and the European Central Bank had operated like a ‘colonial force’ by forcing draconian cost-cutting measures and untrammelled capitalism on economically distressed countries.

Probably the real reason Moscow likes to keep Nicosia close to its heart is the 10 percent corporate tax rate, the lowest in the EU and the main draw for the estimated 50.000 Russians in Cyprus.

Thousands of Russian companies are registered in Greek-Cyprus thus gaining admittance to the European Union, the world’s largest trading block. In Limassol, also called ‘Limassolgrad’, there are Russian schools, Russian real estate agents, a Russian radio station and a Russian weekly. Restaurants beckon their visitors in cyrillic. Russia’s spy agencies are said to operate from GreekCyprus, a location close to the Middle East. In January a Russian cargo ship with 60 tons of ammunition stopped on the island on its way to Syria. GreekCyprus, as an EU member, must obey the Brussels strict embargo on military supplies to Syria. But the ship was allowed to sail after giving assurances that it would alter its route.

This is not a one way story. Greek-Cyprus accounted for 20 percent of foreign investment in Russia, more than China.

The relationship between one of the tiniest EU member states and the Russian big bear is grounded in mutual interest.

It will be very interesting to see how the EU Presidency in the next six months is doing its political split and how the rest of the EU will thaw.

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opinion

Democracy vs. the Eurozone The European Union is a voluntary, quasi-federation of sovereign and democratic states in which elections matter and the electorates in each country seek to determine their own destiny, regardless of the wishes and interests of their partner member states.

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By Daniel Gros*

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ast October, Greece’s then-prime minister, George Papandreou, proposed a popular referendum on the second rescue package that had just been agreed at the EU’s summit in Brussels. He was quickly told off

by German Chancellor Angela Merkel and former French President Nicolas Sarkozy, who considered the referendum (especially its timetable) in breach of the agreement they had just concluded. So the Greeks never voted on it.

But, less than a year later, the referendum is de facto taking place anyway. In a union of democracies, it is impossible to force sovereign countries to adhere to rules if their citizens no longer accept them.

This reality has profound implications: all of those grandiose plans to create a political union to support the euro with a common fiscal policy cannot work as long as EU member countries remain both democratic and sovereign. Governments may sign treaties and make solemn commitments to subordinate their fiscal policies to EU rules (or to be more precise, to the wishes of Germany and the European Central Bank).

But, in the end, the “people” remain the real sovereign, and they can choose to ignore their governments’ promises and reject any adjustment programme emanating from ‘Brussels’.

In contrast to the United States, the EU cannot send its marshals to enforce its pacts or collect debt. Any country can leave the EU, and thus the eurozone, when the perceived burden of its obligations becomes too onerous. Until now, it had been assumed that the cost of exit would be so high that it would never be considered. This is no longer true, at least for Greece.

But, more broadly, EU commitments have now become relative to national priorities.

This shift in context implies that jointly guaranteed Eurobonds cannot be the silver bullet that some had hoped for. As long as member states remain completely sovereign, no one can fully reassure investors that in the event of a major recession or a eurozone break-up, some states will not simply refuse to pay, or at least refuse to pay for the others. In the light of this uncertainty, it is not surprising that bonds issued by the European Financial Stability Facility (the eurozone’s rescue fund) are trading at a substantial premium over German debt.

All variants of Eurobonds come with supposedly strong conditionality. Countries that want to use them must follow strict fiscal rules. But who guarantees that these rules will actually be fol-

opinion

lowed? François Hollande’s victory over Sarkozy in France’s presidential election shows that an apparent consensus on the need for austerity can crumble quickly. What recourse do creditor countries have if the debtor countries become the majority and decide to increase spending?

The recently agreed measures to stre­ ngthen economic-policy coordination in the eurozone (the so-called ‘six pack’) imply in principle that the European Commission should be the arbiter in such matters. Its recommendation can formally be overturned only by a twothirds majority of the member states.

But would a large member country feel bound by rulings from ‘unelected official in Brussels’?

Spain’s experience is instructive in this respect. After the recent elections there, Prime Minister Mariano Rajoy’s new government announced that it did not feel bound by the adjustment programme agreed to by the previous administration. Rajoy was roundly rebuked for the form of his announcement, but its substance was proven right: Spain’s adjustment programme is now being made more lenient.

The reality is thus that the larger mem-

ber states are more equal than the smaller ones.

This is of course not ‘fair’, but the inability of the EU to impose its view on democratic countries might actually sometimes be for the best, given that even the Commission is fallible.

The broader message from the Greek and French elections is that the attempt to impose a benevolent dictatorship of the creditors is now being met by a revolt of the debtors.

Financial markets have reacted as strongly as they have because investors recognise that the ‘sovereign’ in sovereign debt is an electorate that can simply decide not to pay.

This scenario has already played out in the case of Greece, but the fate of the euro will be decided in the larger, systemically important countries like Italy and Spain. Only determined action by their governments, supported by their citizens, showing that they attach overriding priority to their membership in the eurozone, even under difficult circumstances, and that they thus merit unreserved support from the rest of the eurozone, will impress the financial markets. At this point, nothing less can save the common currency.

*Daniel Gros is Director of the Centre for European Policy Studies, Brussels.

CEPS Commentaries offer concise, policyoriented insights into topical issues in European affairs. The views expressed are attributable only to the author in a personal capacity and not to any institution with which he is associated.

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opinion

Is Greece European?

Greece is where the West both begins and ends. The West -as a humanist ideal- began in ancient Athens where compassion for the individual began to replace the crushing brutality of the nearby civilizations of Egypt and Mesopotamia. The war that Herodotus chronicles between Greece and Persia in the 5th century B.C. established a contrast between West and East that has persisted for millennia. Greece is Christian, but it is also Eastern Orthodox, as spiritually close to Russia as it is to the West, and geographically equidistant between Brussels and Moscow.

By Robert D. Kaplan*

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reece may have invented the West with the democratic innovations of the Age of Pericles, but for more than a thousand years it was a child of Byzantine and Turkish despotism. And while Greece was the northwestern bastion of the anciently civilized Near East, ever since history moved north into colder climates following the collapse of Rome, the inhabitants of Peninsular Greece have found themselves at the poor, southeastern extremity of Europe.

Modern Greece in particular has struggled against this bifurcated legacy. In an early 20th century replay of the Greco-Persian Wars, Greece’s postWorld War I military struggle with Turkey led to a signal Greek defeat and as a consequence, more than a million ethnic Greeks from Asia Minor escaped

to Greece proper, further impoverishing the country. (This Greek diaspora in Asia Minor was a massive source of revenue until the Greeks were expelled.)

Not only did World War I have a bloody and epic coda in Greece, so did World War II, which was followed by a civil war between rightists and communists. Greece’s ultimate escape from the Warsaw Pact was a rather close-run affair: again, the effect of Greece’s unstable geographical location between East and West.

Greece struggled on. As recently as the mid-1970s it was governed by a particularly brutal military dictatorship (led by colonels from the backwater of the Peloponnese), which lasted for seven years, and fear of another coup persisted during the initial stage of its reborn democracy. Even though the Olympic tradition began in Greece in antiquity and the first modern Olympics were held in Greece in 1896, Greece was denied the right to host the centenary modern Olympics in 1996 owing to the country’s lack of preparedness in organization and infrastructure. Greece did host the 2004 Olympics, but the financial strain that the games put on Greece contributed to the country’s economic fragility in the run-up to the current debt crisis.

It is not entirely an accident that Greece is the most economically troubled country in the European Union. The fact that it is located at Europe’s southeastern back door also has something to do with it. For Greece’s economic and political development bear marks of a

opinion

legacy not wholly in the modern West.

Roughly three-quarters of Greek businesses are family-owned and rely on family labor, making meritocratic promotion difficult for those outside the family. Tax cheating is rampant. The economy suffers from a profound lack of competitiveness, even as Greece is mainly a service economy, relying on tourism, in which manufacturing constitutes a weak sector. Of course, these features have much to do with bad policies enacted over the years and decades, but they are also products of history and culture, which are, in turn, products of geography. Indeed, Greece lacks enough productive land to be an agricultural power.

Then there is political underdevelopment. Long into the 20th century, Greek political parties had a paternalistic, coffeehouse quality, centered on big personalities -chieftains in all but namewith little formal organizational support. George Papandreou, the grandfather of the recent prime minister of the same name, actually headed a party called the “George Papandreou Party.”

Political parties have been family businesses to a greater extent in Greece than in other Western democracies. The party in power not only dominated the highest echelons of the bureaucracy, as is normal and proper in a democracy, but the middle -and lower- echelons, too. State institutions from top to bottom were often overly politicized.

Moreover, rather than having a moderate left-wing party and a modern conservative one, as is common throughout Western Europe, in Greece through the early 1990s there was a hard-left party, the Pan-Hellenic Socialist Movement (PASOK), which during the Cold War openly sympathized with radical Arab regimes like Hafez al Assad’s Syria and Moammar Gadhafi’s Libya, and a somewhat reactionary right-wing party, New Democracy. The drift of both those leading parties toward the center is a relatively recent affair.

And so the creation of late of a hardleft party, SYRIZA, and a hard-right neo-Nazi movement, Golden Dawn (vaguely reminiscent of the military junta that ruled Greece from 1967 to 1974), both harbor distant echoes of

Greece’s mid-20th century past. Ironically, while Greece’s extreme economic crisis created these radical groupings in the first place, if these new parties fare badly in the upcoming poll it might indicate a firm rejection of extremism

by Greek voters and a permanent turn toward the center -toward political modernity, that is.

There is a tendency in all of this to throw one’s hands up at the specter of the Greeks and declare them too much trouble than they’re worth, at least for Europe. But such an attitude reeks of hypocrisy, even as it denies Western self-interest. When Greece joined the European Union in 1981, its economy was manifestly not ready; Brussels had made a rank political decision, not an economic one -just as it would in admitting Greece to the eurozone in 2002. In both cases, the ground-level, domestic reality of the Greek economy was swept aside in favor of an abstract quasi-historical vision of Europe stretching from Iberia to the eastern Mediterranean.

Of course, Greece, during the 1980s -when I lived there for seven yearsmight have used the influx of cash from the European Union in order to discipline and reform its economy. Instead, then PASOK Prime Minister Andreas Papandreou used the money to swell the ranks of the bureaucracy. Thus, did Greece remain underdeveloped, and the dream-gamble of Brussels failed. The saddest irony is that the sins of the hardleft Andreas Papandreou were visited upon his well-meaning, center-left son, George, who had his short tenure as

prime minister from 2009 to 2011 poisoned by his father’s economic legacy.

But Western self-interest now demands that even if Greece leaves the eurozone -and that is a big “if”- it nevertheless remains anchored in the European Union and NATO. For whether Greece drops the euro or not, it faces years of severe economic hardship. That means, given its geographic location, Greece’s political orientation should never be taken for granted. For example, the Chinese have invested heavily in developing part of the port of Piraeus, adjacent to Athens, even as Russia’s economic and intelligence ties to the Greek area of Cyprus are extremely close. It has been speculated in the media that with Greece short of cash and Russia enjoying a surplus, were the Russians ejected from ports in Syria in the wake of a regime change there, Moscow would find a way to eventually make use of Greek naval facilities. Remember that Greece and Cyprus both have modern European histories mainly because they were claimed by Western powers for strategic reasons.

In other words, from the point of geography and geopolitics, Greece will be in play for years to come.

*Robert David Kaplan is an American journalist. His writings have been featured in The Washington Post, The New York Times, The New Republic, The National Interest, Foreign Affairs and The Wall Street Journal, among other newspapers and publications.

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opinion

Do they represent us?

By Rafael Van Oppen Ardanaz*

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I’m writing this chronicle as a simple business student, proud member of an European Student Organisation and critic young Spanish “Indignado”. My trips abroad and my post as Erasmus responsible in Santander, Spain, get me in contact with young students from all over Europe. I wish to share with you one of my biggest concerns and that of most young people I know: we don’t feel represented by our political class in our home country, let alone in Europe.

opinion

I

hear far too much on the news how politician is the least valued profession in Spain. One of the major issues for the population is the outrageous widespread corruption. Young people in Spain, as my international friends feel with their own Governments, consider that a new Government only changes “who” will steal public funds and “how much”. Is the population starting to consider this inherent to our system or are we forgetting that this shouldn’t even happen to begin with!?

It is sad to say that the European Union does not get a better opinion, as it is seen many times as an artificial and complex structure that tries to tie together countries too far apart. Voting for the European Parliaments isn’t even considered between young students!

Europe is thought to be managed by Germany and France anyway, so what would be the use? People don’t notice the changes these functionaries bring about and don’t understand the complicated structure of Parliaments, councils, delegates, commissions, etc.

In an experiment set to our Erasmus students in Santander we found that hardly anybody was able to name any European parliament members, and only recalled the name of a few tiptop post European politicians. Most

than 40. Seems we must accept that young politicians can only aspire to become responsible for a small secondary posts or ministry. This trend is surely changing but it’s too slow to perceive.

If nobody defends our point of view in the Government, why would we believe their promises?

We have examples of these problems bringing us visible trouble. We are in the middle of a huge crisis in Europe. The solution is financial and has to do with these invisible, fast-moving, ruthless markets we hear about on the news. Politicians and bankers try to convince these nameless investors and private rating companies that Europe will prosper and grow.

But how are they going to believe our leaders when not even we do? We are lied to time and time again about the year the economic growth will start, about the number of jobs that will be created, about the ability to achieve a debt mark, etc. The politicians promise the world to us, but once we vote them they brake, one by one, all the commitments they made to us!

Living a life surrounded by young Europeans, in a country that’s in the eye of the storm, I can assure nobody even starts to believe what our politicians say. It’s the reason why Spain is so pessimistic about its own recovery and the

of them though, couldn’t even explain what they were responsible for. Our surprise was to know most didn’t even care. “We didn’t vote them!” Nevertheless, politicians can create a Government above any of the individual 27 Governments without asking us. “Why would they ask us? They don’t even do it “at home” - was an usual answer.

To put the matters even worse, young people don’t feel represented because it is almost impossible to name one European or national politician younger

population, no matter what the Government promises, just gets ready for a new and bigger down-turn of social care, employment and stabilization. If the whole population doesn’t believe in the economic revival how are “the markets” going to?

As anybody who is critical, and therefore is seeking to point out a problem, I can’t finish this article without offering my opinion on what the solution could look like. My frustration and criticism looks like hatred towards the European

institutions, but that is very far from the truth. As a Business student I have learnt that critical insight and changes are a way of making things more efficient and cost-worthy, and must be seen as a blessing, not a curse.

An old Chinese proverb says that a crisis is the combination of a problem with an opportunity. We have a major problem, let’s use this opportunity to change things to the better! I would try to promote the following ideas for the future: First, politicians, in the national and the European level, can’t lie in an impervious way! We, the people, have decency and can’t be handled with a carrot in front of our heads to lead the way. I strongly support a 15-M iniciative in which politicians can be sued for promising something and doing the opposite. What would happen if you work for Audi and you promise keeping the number of employments and kick out half of the workers once put into office? Just like any job in the world lying bluntly can’t go without sanction.

Second, Europe as an institution should cease to be seen as an intricate ghost structure imposed on us. I’m sure that measures are being taken in this direction, but it’s unnoticeable. Studying Europe as a structure and institution in schools, high schools and the University should be necessary. Not only law scholars should know how Europe works as a whole.

Third, I know myself that young politicians are being encouraged by European Institutions because I’ve visited them in Brussels. I find it a reasonable, logic and intelligent decision, principally because we represent the future and should help deciding about the world we want to live in. This doesn’t happen in the national level. I think Europe shouldn’t impose numbers on member countries in this matter but should encourage it through political activist associations for young people and formal recommendations. *Rafael Van Oppen Ardanaz, ErasmusResponsible/A.E.G.E.E Santander/Euro­ pean Student Forum/ Member of the ThinkYoung’s writing team.

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european affairs

A Taiwan – EU Economic Cooperation Agreement would unlock dynamic gains A study by the Brussels based European Institute for Asian Studies (EIAS) shows that an Economic Cooperation Agreement (ECA) between the EU and Taiwan would generate significantly more opportunities for EU industry and business, and would also see an increase in the flow of foreign direct investment (FDI) from two sides. In May 2011 the European Parliament adopted a resolution supporting an EU-Taiwan ECA but the European Commission seems hesitant to list Taiwan as a party to negotiate FTA.

By N. Peter Kramer

T

aiwan’s economic and trade performance has bounced back dramatically since the 2008 global financial crisis. But according to the statistics, Taiwan trade has surpassed its precrisis level! Global trade volume in 2010 amounted to €362 billion, an increase of 41.3% compared to 2009. Taiwan’s total exports during 2010 accounted to €189 billion, a growth of 37% and its total imports reached €173 billion expanding 47% compared to 2009. GDP growth in 2010 was 10% year-on-year. The EU is Taiwan’s 4th largest trading partner accounting for nearly 11% of total trade and the largest source of FDI. Import of goods from Taiwan by the EU stood at €24 billion, while exports to Taiwan amounted to €15 billion. European business collectively constitutes the largest group of foreign investors in Taiwan witch a cumulative value of €22 billion.

The joint venture model many European firms have adopted has very successfully combined European expertise with Taiwan’s local knowledge and talent.

Taiwan is not only a knowledge -and innovation- based economy; it is also one of the few liberal democracies in East Asia. Its policies regarding human rights, democracy, labour and environmental

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standards are based on the same values as in the EU, in contrast to the situations prevailing in many other Asian countries.

An ECA with Taiwan would further enhance opportunities for EU industries in a critical growth market. According to studies conducted by the Chung-Hua Institution for Economic Research, a leading Taiwanese research center, a Taiwan-EU ECA would boost Taiwan’s real GDP by nearly €1 billion and the EU’s real GDP by €2 billion annually. These impressive figures would be bolstered by the trade synergy created by ECA and the Economic Cooperation Framework Agreement (ECFA) signed in 2010 by Taiwan and mainland China! Signing of an ECA will allow EU investors to build on expanding cross-strait trade and regional ties. The ECFA provides the basis for a stable environment for expanding the EU’s commercial presence across Taiwan, mainland China and the Asia-Pacific. The ECFA will also allow EU companies in Taiwan to safely extend their reach into mainland China. European companies face increasing difficulties in doing business in mainland China in terms of protecting proprietary information, experiencing standards discrimination and accessing services markets. Furthermore,

European businesses in mainland China often encounter cultural and administrative barriers. In contrast, Taiwan, that shares a common culture with mainland China, has already achieved a large degree of business success there. With nearly seamless access to mainland China under the ECFA, Taiwan can serve as a bridge for EU companies.

The European Chamber of Commerce in Taipei (ECCT) wrote in September 2010, after the signing of the ECFA: “A trade deal of Taiwan with the EU – Not how, but when is the question!”.

Also the influential Brussels based European Centre for International Political Economy (ECIPE) said at the same time, that the agreement between mainland China and Taiwan could pave the way for a similar deal with the EU. And Taiwan’s envoy to the EU, David Y. L. Lin, a former Deputy Minister of Foreign Affairs, has even gone so far to say that signing a trade agreement with the EU is of great importance and called for substantive discussions to begin by looking at some key sectors first to get talks moving. It is waiting for the European Commission which recently has initiated negations with Singapore, Vietnam, Malaysia and India...

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european affairs

Concerns over the EU legal order How far can the European Commission go in interpreting procedural rules?

Several recent cases fuel this discomfort

By Daniel Guéguen*

T

he Lisbon Treaty is not the best of treaties. In appearance, the treaty simplifies the legal framework and decision-making processes.

In practice, however, post-Lisbon procedures have become more complex, opaque and increasingly ad-hoc. To put it bluntly, one gets the impression that European decision-makers are easing/ simplifying procedures and bending them as it suits.

Since the beginning of 2010, when my book “Comitology: hijacking European power?” was published, a number of cases showing procedural flaws, have been brought to my attention. This made me question the Community method, the balance of power and in general the EU legal order.

Based on these cases and reflections, I have written a 10 page dissertation which you can download at: www.pacteurope.eu. A summary is provided here.

First of all, what is a legal order?

A good definition for this - in appearance - very clear concept is hard to find.

After searching, the most compelling

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reflection comes... from Canada. Guy Rocher, full Professor at Harvard and Laval University defines it as “a set of binding rules whose adoption is based on legitimacy. The rules and agents or bodies must demonstrate stability over time, relative permanence.”

It is clear that the institutional instability that the EU has known over the last 10 years is in itself a source of legal instability. Just as a reminder of the long list of reforms the EU has undergone: the draft Constitutional Treaty, the comitology reform of 2006, the Treaty of Lisbon end 2009, a new comitology reform in 2011.

The top of EU Institutions sets the bad example “Free interpretations” of the European legal order are probably linked to some extent to the institutional, economic and monetary upheavals affecting the European Union since 2008, as if the urgency or gravity of the situation constitutes sufficient ground to adapt the law to the circumstances.

Three examples are particularly illuminating: the adoption of the energy and climate change package in December 2008, de facto side-lining the European Parliament and the Council of Ministers to the benefit of the European Council of Heads of State or Govern-

european affairs

ment, at the time not even an EU Institution.

The dismantling of the Community method by MerkelSarkozy to the benefit of the intergovernmental approach is a second striking example. The third example is linked to the struggle for power between the Commission-Council-Parliament when dividing implementing measures in delegated acts and implementing acts.

This bad example contaminates the overall EU decision-making process Three cases in particular show the trend towards bad procedural practices: legal window-dressing, short-cut procedures, approximations, interpretations of the rules,.. and overall a lack of respect for the spirit of the Treaties.

The first case: the Fuel Quality Directive. In this file, the letter of the rules is respected but in spirit they are violated.

Whether it concerns the Impact Assessment, the consultation process, the publication in the Comitology register, alternate compromise proposals by Member states, interservice consultation, it all amounts to a stop-and-go process, U-turns and opacity.

The second case: the revision of the pharmacovigilance legislation in which we find delegated acts co-existing with the Regulatory Procedure with Scrutiny. These two procedures can in principle not feature together in one and the same piece of legislation, as one applies to legal acts pre-Lisbon and the other to acts post-Lisbon. Legal experts at the Commission justify this anomaly by indicating that the rules can be adapted if they facilitate a political compromise.

The third case: ORPHACOL, disavowing implementing measures! Orphacol is a medicine used for the treatment

of two extremely rare and serious child liver diseases, and is an alternative to liver transplantation. The medicine was approved twice unanimously by the European Medicines Agency. Nevertheless the Commission opposes to it and drafts a proposed regulation refusing market authorisation.

In the Examination and Appeal Committee Member states oppose the Commission’s refusal at qualified majority. The Commission however persists in its refusal. The file is taken to the Court of Justice which accepts an accelerated procedure and schedules a hearing on 24th April 2012. Barely one week after this hearing, the Commission re-introduces its proposal for refusal of market authorisation to the Examination committee on the 8th May (a public holiday in a number of EU member states). The same proposal the Examination Committee voted on and rejected at QMV on 13th October 2011! Member states come short of a few votes to reject the Commission’s proposal at qualified majority. The Commission now has the free hand to adopt its proposal.

The Court’s ruling is expected with impatience.

Urgent action is needed. The “Community procedures” are dispersed among various texts that are sometimes referred to as «rules of procedure», then as mere «guidelines» or «guidances». It seems indispensable to consolidate all these texts – and to clarify their content – creating one single clear, coherent, uniform and mandatory Community Code, with national codes of procedure serving as models.

To answer, please contact the author: Daniel Guéguen, dg@pacteurope.eu

*Daniel Guéguen is a Professor at the College of Europe on comitology.

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european affairs

Europe also influences on education!

When you study Journalism, you are taught that the first paragraph is made for telling the reader what is going to find. This article is not a deep investigation about the Bologna Planning and its consequences to the university and economic world. These words are my thoughts about the influence of Bologna’s Plan in education and the abilities and capacities that it boosts.

It just comes from my experience living both education systems.

By Adréa Pavon Guinéa*

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F

irstly, and theoretically, the Bologna Plan was born from the Bologna Declaration, signed by the Ministers of Education of the members of the European Union in 1999 in the Italian city, which has the same name as the agreement. The main goal is forming a Superior Education European Space, adapting the national systems to allowing a free exchange of academics and students throughout the whole European territory. It has caused changes: it has been applied a new system of university credits (European Credit Transfer System) and the university studies are based now on two cycles, resembling the Anglo-Saxon model. Complaints? Lots. Most of them focused on the economic aspects and in the loss of autonomy from the universities. But how this theory came about?

I studied Journalism entirely with the old Spanish system, which was based on four (or five, depends on the university) years of university education. The professors gave us mostly lectures. But lectures don’t mean conferences but classes where the professor speaks and the students listen. Finally, students took one exam (each subject has one) and the mark was just the result of that exam. You could choose whether you went to class or studied by your own.

But, whatever you chose, you found yourself with ten days filled with six or even seven exams, one after another. It means to me that the old system was rewarding the memory to the detriment of reasoning. You could be able to have a very good command of a subject but

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you got a low mark in the exam because the student was forced to study three of maybe four hundred of pages of each subject in a short time (and the human being is fallible). Or you could get a high mark because of your great memory but you weren’t able to put into practice your knowledge. It is often said that the old system caught the university essence: an atmosphere different from school where people are free to schedule their learning. Nevertheless, from my point of view, it just benefited professors and brilliant students. I have said brilliant students because they will success whatever the system is. Finally, I would like to say, not a way of vanity, that I got 3,45 out of 4, so I am not criticising the old system because of bad marks.

Currently, I am studying Law with the Bologna Plan. This system forced me to go regularly to class so it has been condemned on account of its resemblance with high school. But, for me, it is a profitable thing because, in the old system, the laziness of mostly students took advantage of the freedom that was given by that system. So, now, there is no place for laziness. Moreover, you don’t have to risk your marks at once. It implies that the student has more time to assimilate and reason the concepts.

Now, each subject is divided like the following example: • 40%: four exams during the semester • 20%: two research papers • 20%: three debates • 20%: three seminars By this method, the student shows as well as his memory abilities, others as his capability to research and argue, developing both oral and writing skills. And, for me, the crucial point is the possibility that provides this system to be able to understand the world because of the new credit system. The credit now is divided in theory classes and practical ones. So, each week, you attend to one professor’s lecture and then you study the concepts by method cases, debates or actuality issues. Maybe, it seems a consolidate fact in many European countries, but in Spain is a great deal obtained thanks to the European Union.

As an example, if you studied Consti-

tutional Law with the old system, you would learn that the article 6 of the Spanish Constitution regulates the right to forming political parties. But you would lose lots of shade meanings that you are able to learn through method cases or debating actuality issues. From the fact that, in Spain, that right is not an autonomous right but a right stems from the right to assemble to the ability to comprehend its consequences to the legal system.

Obviously, the Bologna Plan has disadvantages: it goes without saying that the price for the university has gone up and people find fault with the influence of the private sector in the public education. But, in my opinion, at least in Spain, the private sector intervention is unavoidable due to welfare state.

There are three kinds of welfare states: the minimum American one, where the private sector has the most of the power to the Education and Health. Then, there is the welfare state of continental Europe (with its differences) that is based on the idea that the state has to be able to provide people free health and education. The same happens to the welfare state of the Scandinavian countries but, here, there is an essential difference which becomes decisive. Meanwhile Scandinavian countries, imposing high taxes, are able to offer top quality public education, continental countries (I am focusing in the Spanish case) aren’t.

They provide public education but, at the same time, education is something

that is usually cuts when austerity comes.

It means that public education is losing its quality, and the middle class is running away from the public sector to the private one, which offers higher quality levels of education and health.

To sum up, although the European Union ought to struggle for a deeper integration, the idea of an educational convergence seems to me an advantageous choice for the weaker European countries to learn from the strong ones.

In a globalised world, the country’s borders are cracking and people have to work for the world, and not just for one country, because all decisions have a world impact. Consequently, the Bologna Plan is a good way to enable students to learn theory and developing it into the world.

*Adréa Pavon Guinéa, Spain, member of ThinkYoung’s writing team.

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european affairs

EU still offers ‘tremendous opportunities’ for US A new study says that despite the eurozone crisis, member states offer “tremendous opportunities” for US businesses. Europe remains the most profitable region in the world for “corporate America”.

Source: Centre For Transatlantic Relations, Johns Hopkins and the German Marshall Fund

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he report states that the economic crisis has triggered EUwide structural reforms that will make Europe stronger, not weaker in the longer term.

Meanwhile, the EU, it says, remains the largest and wealthiest economy in the world.

“The prophesying by the pundits that the future of the world economy lies with emerging markets like China, suggests that Europe is becoming less and less relevant. Nothing could be further from the truth,” said report author Joseph Quinlan.

Quinlan is a transatlantic fellow at the Centre For Transatlantic Relations, Johns Hopkins and the German Marshall Fund are co-authors of the report.

He added, “The report reveals that despite Europe’s economic difficulties in 2011, the region still accounted for over

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half – 53 per cent – of total US foreign affiliate income last year.

“This was 156 per cent larger than reported income from Asia -a figure that speaks volumes about Europe’s underlying importance to corporate America.”

The European combined economy is larger than that of the US and accounts for about 30 per cent of global personal consumption; greater than the share of the US (27.7 per cent) and more than double the BRICs (Brazil and India) combined (13.6 per cent).

Further reaction came from Hendrik Bourgeois, chairman of AmCham EU, who said, “It’s crucial that American businesses continue to reap the benefits that investing in Europe has to offer. To ignore a combined market economy larger than the US would be a costly mistake.”

The report found many advantages to doing business in Europe. Europe accounts for 25 per cent of global R&D expenditures and produces the largest share globally of natural science graduates – 18 per cent; with a 17 per cent share of engineering degrees (compared to four per cent in the US). Europe also comes out on top

when it comes to ease of doing business.

According to the World Bank, 12 European economies ranked in the top 25 most business-friendly; this is in contrast to some of the emerging markets that did not rank very highly – China 91st, Russia 120th, Brazil 126th, and India 132nd.

Additionally, the countries on Europe’s periphery, notably the Middle East, Russia, Turkey and North Africa remain key sources of growth and consumption.

Europe’s trading links to those countries have deepened and thickened over the past decade to the benefit of US companies operating in Europe.

Foreign investment and shifting production overseas are often thought of as destroying trade or reducing US profits and job losses, but in reality the opposite is true.

Quinlan said, “US affiliates in Europe help create trade, not destroy it.

“The more profitable US affiliates are in Europe, the more earnings are available to the parent firm to hire and invest at home, dole out higher wages to US workers and pay out dividends to US shareholders.

“That’s win-win for both sides.”

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geopolitics

Taming the Dragon:

China and EU in Africa In Luanda, the capital of Angola, Chinese construction workers are relentlessly putting up another gleaming skyscraper, one of many which have been popping up like mushrooms all over the city over the past few years.

By Paul Haydon*

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ack in 2002, this was a barren, impoverished place, ravaged by decades of civil war. Now it is the centre of one of the fastest growing economies on the planet, with new infrastructure and construction projects rapidly transforming the face of the country. The driving force behind this change: China. The East Asian giant is pumping billions of dollars worth of aid and investment, largely in exchange for resource-deals, most importantly access to Angola’s vast supplies of oil.

Yet Angola is not the only African country to benefit from China’s resurgence onto the global scene. All across the continent new roads, railways, factories and mines are being built on an unprecedented scale, financed by Chinese investments, and accompanied by a huge exodus of Chinese workers and businessmen. The Chinese claim this is part of a new path to development, based on an equal partnership. Yet many are concerned about the implications of this approach, especially for the promotion of

democracy and human rights in Africa.

In Europe especially, there is growing concern about China’s no-strings policy to aid, symbolised potently by its support for the Sudanese government whose leaders stand accused of genocide in Darfur. Since 2000, the European Commission has added political conditions such as respect for human rights and democracy to its aid and trade agreements with African countries. Yet many people feel that this policy is being undermined, as repressive regimes can increasingly look to China for assistance.

On top of this, the financial crisis has put into question the dominance of Western liberal democracy. African elites are now increasingly looking instead to the Chinese model, which combines capitalism with a strong autocratic state. Many in Europe fear any progress towards greater democracy and human rights throughout Africa is being put at risk by China’s growing presence, which has promoted an alternate, non-democratic vision of development.

Another concern is that China is interested only in milking Africa’s resources, quenching its inexorable thirst for raw materials to sustain its economic boom. China is thus viewed as a neocolonialist power, intent on exploiting its African partners but with no concern for their long-term future or for

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local and environmental concerns.

However, we need to be careful not to assume that China’s rise is necessarily a ‘bad thing’ for Africa. The view of China as a greedy, self-interested power seems to be ingrained in many young people throughout Europe, fuelled by the media and a general fearful miscomprehension of the country. But we need to remember that the over last 50 years, European aid policy in Africa has done little to dent the chronic poverty which permeates the continent. In contrast, over the last 30 years China has lifted 400 million of its own people out of poverty, representing the biggest economic boom the world has ever seen.

Perhaps it can help to recreate this process in Africa too.

At the same time, accusations of neocolonialism ring a little hollow when one considers Europe’s own role in Africa. Aside from the shameless exploitation associated with colonial times, we currently dump millions of tonnes of toxic waste across the continent, and also continue to subsidise our agricultural produce to the detriment of African farmers. We should therefore be careful to avoid charges of hypocrisy before rushing to judgement.

Undeniably, China’s growing presence in Africa is also driven by selfish motives.

It needs new supplies of vital resources,

as well as growing markets for its goods.

However, unlike its European colonial predecessors, the Chinese diaspora is not backed up by the barrel of a gun. It is based on trade and cooperation, and thus requires the consent of local governments and companies. We shouldn’t then fall into the trap of claiming to know what is best for Africans, whilst not letting them decide for themselves.

However, it is also important to recognise that despite the huge economic gains, there have also been important social costs associated with China’s growing presence. Shoddily constructed buildings have collapsed, protesting African workers at a mine were shot at by its Chinese owners, and many local traders are being undercut by cheap Chinese imports. Growing discontent and widespread anti-Chinese sentiment have shown how African citizens on the street do not always share the optimism of their political leaders.

There are then important shortcomings to China’s approach, in spite of, or perhaps in part due to, its impressive success in actually getting things done. The rush to build economic infrastructure has not been accompanied by the building of political institutions required to resolve social conflicts. In this respect, there is potential for the EU and China to play complimentary roles. For example in

Angola, the European External Action Service is funding a project aiming to promote good governance, enhance the provision of public services and improve the human rights situation. This is happening alongside the massive Chinese investment into the economy.

Another area in which the EU has significant expertise is in the promotion of regional trade; it is after all the world’s most successful single market. Trade deals between Africa and China have been based on the export of natural resources, with little promotion of intraAfrican trade, whilst several EU projects have aimed to promote regional trading blocs throughout Africa. These are now being complemented by the huge Chinese-built motorways and railways which are beginning to link up the continent.

Perhaps then it is time we stopped viewing China as a threat to Europe’s policy towards Africa, and instead as a potential partner. Whereas China has experience in rapid economic transformation and in building huge infrastructure projects, in Europe we have expertise in institution-building and the creation of a regional single market. This means we potentially have a lot to learn from each-other. Instead of considering our approaches to development in Africa as mutually exclusive, we should look at how they could be mutually reinforcing. In the end though, we need to encourage a dialogue which includes everyone, most importantly African citizens themselves.

*Paul Haydon is currently studying a Masters in European Public Policy at University College London. He’s previously worked at the European Parliament and at a magazine in Shanghai, China. He also writes a blog on UK and EU politics.

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Europe ignoring geopolitical flashpoint of South China Sea As sabres rattle in the long-lasting territorial disputes over the South China Sea, now considered by many to be the new Persian Gulf due to its potential reserves of oil and gas, the European Union remains a marginal actor in the region

By Francesco Guarascio

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iplomatic scuffles among the countries facing the South China Sea are nothing new. China, Taiwan, the Philippines and Vietnam have been in dispute over islands, rocks and reefs for decades with each country having a list of demands. “A spaghetti bowl of claims,” as Theresa Fallon of the European Institute for Asian Studies refers to it. The interests at stake provide some explanation. The sea is a key transport route with half of the merchandise leaving and arriving in Asia passing through it. Some 85 per cent of the region’s energy resources also pass through these waters.

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“Whoever controls it can control the future of Japan or Korea, among others,” explains Fallon. The sea is also a key source of fish, which is a fundamental component of regional diets, and in the case of China also compensates against its increasingly polluted farmland production.

The potential huge oil and gas reserves recently discovered make the sea even more tempting for the energy-thirsty economies of the region. “By mid-2010, 180 oil and natural gas fields and more than 200 oil-gas-bearing strata had been detected in the South China Sea, with most located at between 500 and 2,000 meters. Though large oil fields have been found in the area, exploitation by Chinese oil drillers seems to have been slow,” warns an article in the China’s Global Times, a mouthpiece of the ruling Communist Party. This alleged slow drilling activity may soon become a thing of the past, as China prepares to use a new deep-sea oil rig weighing over 30,000 tons. It is capable of extracting oil at a depth of up to 12,000 meters in the basin.

Against this background, it comes as no surprise that tensions are escalating. Seizures of fishing boats are regularly carried out by patrols claiming to protect maritime borders, despite the fact that these frontiers remain undefined. Increasing militarisation of the region is also a distinctive feature of recent years, as China is flush with foreign money and regional contenders demand a more visible United States presence. “We expect China to increase patrolling activities in the area, risk of armed rows will increase,” acknowledges a Taiwanese diplomat. Best selling author Tom Clancy made the South China Sea the

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theatre of the fiction SSN, where America and China fight the third world war over the control of the oil-rich Spratly Islands.

Fiction aside, pro-war slogans and declarations are on the rise. “Vietnam and the Philippines should mentally prepare for the sounds of cannon,” reads a headline in the Global Times. Northern and Southern Vietnamese recently held a rare joint demonstration against China’s bullying in the region. “The South China Sea is the future of conflict,” is the title of a recent piece of Robert Kaplan in the influential Foreign Policy magazine. China’s People’s Daily dedicated 325 articles to the territorial dispute in the South China Sea in 2010, compared to an average of one article a year in the two decades between 1980 and 2000. This year’s annual session of the National People’s Congress, the Chinese Parliament, decided that pupils will learn at school that the South China Sea and its myriad of tiny islands and rocks belong to China.

This mounting nationalistic propaganda has own downsides.

“Riding this nationalistic tiger will make it more difficult to get rid of,” argues Fallon.

There is room for negotiation, but these have so far yielded poor results. The maintenance of the status quo certainly does not help the contenders, but a definitive solution risks leaving many unsatisfied. Therefore, stalling techniques proliferate and claims are deliberately not clarified. How can talks proceed if nothing concrete is actually on the table? China stands accused of delaying any lasting solution, while pushing the other countries of the region into bilateral negotiations, in a form of divide and rule tactics. “This is excellent fodder for journalists, who

portray this as China trying to pick off its rival claimants one by one. Obviously, nobody talks about the fact that rival countries have disputes over the same area with each other too,” argues a pro-China blogger under the nickname Maitreya Bhakal.

So what is the role of the European Union in all this? Almost none. Europe’s distance from the South China Sea is not only a question of geography. Asia is also distant from the hearts and minds of many Europeans. In many southern European countries, protectionist rhetoric depicts Asia as an enemy rather than an opportunity. Debates over Asia are rare on mainstream European media. Worryingly, young Europeans are less and less interested in Asia – as opposed to a trend recorded in America showing the opposite for young people in the US, according to a survey commissioned by the German Marshal Fund think-tank.

The South East China disputes are notably absent from the speeches of European leaders. In recent years, there have been only a few dull official commentaries. “The European Union re-iterated its support for a peaceful resolution of the dispute on the basis of international law,” reads a note released by the EU over the South China Sea row during this week’s South Korea Nuclear Summit. The lack of interest is almost certainly due to the dominating Eurocentric approach, accentuated by the ongoing eurozone crisis. Perhaps it also owes something to the complexity of the South China Sea’s opposing claims. As the former EU ambassador to China Klaus Ebermann puts it “this is even more complex than the European Union machinery”.

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geopolitics

Russians Back Political Freedom and Putin Too “Country begins to tire of Putin’s reign” was the heading of a special Financial Times report about Russia. Is that news? Just after the French sent their President home after 1 term and with a chance that the Americans will do the same with their one in November, I would answer no on this question. Recent history learns that voters get tired of their leaders, after one term it is may be still an exception, but after two or three it looks quite “normal” nowadays, see for example Tony Blair, Gerhard Schröder and even Berlusconi.

It

By N. Peter Kramer

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is interesting to read a just published report about Russia by Pew Research Center. This leading institute, based in Washington DC and Democratic Party leaning, concluded on base of a nationwide survey that: “following a winter of discontent, Russians express an increased appetite for political freedom and at the same time strongly endorse Vladimir Putin”!

The poll finds a number of indicators of support for the status quo. Most notably, 72% of Russians voice a favorable opinion of Vladimir Putin, while almost as many hold a positive opinion of Dmitri Medvedev (67%). Putin’s popularity is being fueled more by

views of the economy and perceptions of social mobility than it is being hurt by democratic aspirations. Among the presidential candidates this spring, Putin is the only one viewed favorably by a majority of Russians. Putin’s base of support is broad, although he is especially popular among women, Russians ages 30-49 and those with less than a secondary education. To the degree that democratic leanings help shape attitudes toward Putin, those who say an uncensored media is important are less likely to have a favorable opinion of Russia’s long-time leader.

Further, as they have for most of the post-Soviet era, a majority of Russians continue to feel that relying on a leader with a strong hand in order to solve problems is more important than relying on a democratic form of government (57% vs. 32%). In addition, strong majorities say it is very important to live in a country where there is law and order (75%) and economic prosperity (71%).

In fact, three-quarters (75%) say they would choose a strong economy over a good democracy.

On the other hand, compared with just a few years ago, the report says, that more Russians believe that voting gives people like themselves an opportunity to express their opinion about the country’s governance; more feel that it is important to be able to openly criticize the

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government and greater numbers see freedom of the press and honest elections as very important. A solid majority (64%) see attending protests as an opportunity to speak out about how the government is run, and more than half (56%) specifically approve of the mass demonstrations that followed the December parliamentary vote, which was marred by fraud allegations.

Some other interesting outcomes of the Pew survey* of 1,000 adults in Russia, conducted between March 19 and April 4, 2012, are: • Since 2002, five of six measures of democratic freedom have witnessed double-digit increases in terms of the percentage of Russians describing them as “very important.” They are: honest elections, religious freedom, uncensored media, free speech and a civilian-controlled military. However, relatively few Russians see these as a reality. Roughly one-in-five or fewer say a fair judiciary (17%), honest elections (16%), uncensored media (15%) and civilian-controlled military (14%) describe Russia very well.

• In 1991, when Russians were first asked if voting gave people a voice, opinion was divided: 47% said yes, while 43% said no. By 2009, the public had actually soured somewhat toward the ballot box, with 44% saying their vote mattered and more than half (54%) saying it did not. But this spring there seems to be a renewed conviction that casting one’s vote matters – a 56%-majority now believes this to be true. Just over a third (37%) disagrees.

• While a modest 56%-majority says they are satisfied with the outcome of the March 4 presidential election, just 47% believe that the election was fair. Not surprisingly, reaction to the election results is especially positive among Russians who hold a favorable opinion of Putin (71% satisfied) and those who feel they are better off financially than they were five years ago (71% satisfied).

• More Russians today (46%) than at any point since 2008 say things are going well in their country, but worries persist. In particular, a majority (64%) continues to describe the economy as poor. Internationally, meanwhile, Russians show signs of insecurity. Slightly more than half (55%) believe their country is generally disliked by other countries – an increase of eight percentage points since 2010.

Putin’s shoring up of his popularity

The size of the marches has shrunk since December when the largest anti-Kremlin demonstration since the beginning of the nineties gathered more than 100.00 protesters, but the causes of the protest have not. Anti-Putin opposition leaders as Boris Nemtsov and Alexei Navalny have not managed to present an alternative. The public mistrusts much of the opposition which is too closely associated with the Yeltsin years when democratisation of Russia started but also a liberalisation process that oligarchs, many of them living in the safe haven the UK is offering them, were massively enriched by a privatisation of state companies and private property ended up concentrated into few hands.

Also among critics of the anti-Putin opposition weariness is growing. Maksim Shevchenko, a television journalist, told the FT: “I consider Putin to be an effective crisis manager who pulled the country out of a crisis in which we were threatened by the collapse of the state. Now he needs to find a balance between managing the country and allowing it to develop”.

To shore up his popularity President Putin started his new term the same way as his fresh colleague in France, Francois Hollande, did, with keeping campaign pledges for additional government spending. The Russian President also took an assertive stand in foreign policy with his role in the Syrian crisis, by refusing to endorse UN sanctions against Damascus. This has played well in Russia, where voters like to see their leaders standing up to “the West”. *For the full report, visit http://pewglobal.org/.

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economic outlook

Europe’s Failed ‘Austerity’

The backlash against European austerity is now in full swing. Meanwhile, in the U.S., advocates of big government are insisting that the European debacle proves we must reverse our efforts to reduce debt and deficits. After all, Paul Krugman writes in the New York Times, “claims that slashing government spending would somehow encourage consumers and businesses to spend more have been overwhelmingly refuted by the experience of the past two years.”

By Michael D. Tanner*

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economic outlook

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iven Europe’s continued slow growth, Professor Krugman might have an argument to make -if there actually had been any austerity in Europe over the last two years.

It is true that Europe has not been engaged in the same sort of massive Keynesian spending that characterized, say, the Obama stimulus package. Well, that’s not universally true.

Portugal did try its version of stimulus spending: It pumped more than €2.2 billion into the Portugese economy in 2009, 1.25 percent of its GDP. The result was that economic growth stayed negative, while unemployment rose by

of one percentage point in the top marginal tax rate (from 40 to 41 percent), and an end to the automatic indexation of tax brackets for inheritance, wealth, and income taxes. There was also a 5 percent hike in the corporate income tax on businesses with revenue of more than €250 million, as well as a hike in the capital-gains tax, and closure of several corporate tax breaks. And even though most of these tax hikes were aimed at the wealthy, the middle class did not get off free. There was an increase in the Value Added Tax (VAT) and the excise taxes on tobacco and alcohol.

roughly 3 million Portuguese workers.

Recently, that country’s finance minister told the New York Times that “it didn’t turn things around, and may have made things worse.”

At the same time, the rest of Europe was hardly “dismantling” the welfare state, as the Washington Post’s Eugene Robinson claims. Of course, given that the average EU government consumes more than half of a country’s GDP, a bit of dismantling might be in order.

But so far, European governments haven’t even been willing to take a penknife to the welfare state, let alone an axe.

In France, for example, the so-called austerity largely consisted of raising taxes. There was a 3 percent surtax on incomes above €500,000, an increase

That’s an agenda that should gladden the heart of any tax-increase zealot -or even Paul Krugman.

True, there were some entitlement reforms and spending reductions. But they haven’t actually occurred yet. For example, France will raise its retirement age from 60 to 62, but not until 2017! A cap would also be put on government health-care spending, starting next year. It is a little hard, therefore, to discern whether it is budget cuts that may or may not happen some day in the future, rather than tax increases today, that have slowed French economic growth.

Or take Britain, where the Tory-Liberal coalition recently suffered a drubbing in local elections, in part as a reaction to so-called austerity measures.

Among the Cameron government’s first “austerity” measures was to hike the personal income tax to 50 percent for those earning more than £150,000 a year. That measure managed to actually decrease income-tax revenues by £509 million. The U.K. did trim government payrolls and cut back on some government programs, but British government spending still consumes more than 49 percent of GDP. Government spending actually increased by £59.2 billion from 2009 to 2011.

Other European countries have taken the same approach: tax hikes today (especially) on the rich and promises of tiny benefit cuts in the dim and distant future. Spain imposed a “wealth tax” on citizens with €700,000 of assets, and a 7 percent income tax on those earning more than €300,000 per year; capital-gains taxes were also hiked.

Italy imposed a “Solidarity Tax” of 3 percent on all taxpayers who earn more than €300,000. Greece increased taxes by nearly twice as much as it cut spending, including a 5 percent surtax on the wealthy. VATs were hiked nearly everywhere. And fuel, alcohol, and tobacco were also prime tax targets.

It should come as no surprise that all those new taxes, combined with a lack of spending restraint, has threatened to throw Europe back into a double-dip recession. Is it any wonder that French, Greek, and British voters were anxious to “throw the bums out”?

Wait, this sounds familiar. Tax hikes on the rich accompanied by vague promises of future spending restraint, while refusing to restructure entitlement programs. That sounds a lot like... Barack Obama.

Maybe the U.S. can learn something from Europe after all.

*Michael Tanner is a senior fellow at the Cato Institute and author of “Leviathan on the Right: How Big-Government Conservatism Brought Down the Re­ publican Revolution”.

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economic outlook

France’s Economy is Doing All Right, Thanks!

Even before the French elected Francois Hollande as their new president, global predictions of doom and gloom for the French economy were growing louder. Count on them growing louder still - if France balks at following the successful economic strategy of its eurozone partner, Germany. This article explains why the German model won’t work for France.

By Thomas Fricke*

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he analysis of what’s wrong with the French economy appears to be clear: France is mired in idleness, a quasi-religious belief in an expansive role for the state, outdated economic structures and an inability to combat rising unemployment. The advice is perfectly clear as well: Francois Hollande, France’s newly elected President, should finally do what... well, what the Germans have done.

Sounds great, right? A closer view, however, reveals that the broader finding -that the French economy is beset by long-term weaknesses both cultural and structural- is not particularly apropos.

Nor is the recommendation that France should quickly copy what seems to have been working for the extremely exportdependent German economy.

It is true that French exports have been growing more slowly than German exports for years -losing a great deal of

market share in the process. It is also true that the unemployment rate in France exceeds that of Germany -and that only the German unemployment rate has fallen substantially since the 2009 recession.

Both of these facts indicate a need for reforms. But what should these reforms really look like? According to the OECD, France already imposes lower taxes on corporate profits and income than Germany does. And the average French worker logged 1,554 hours on the job in 2009 (the last year for which comparative data is available) -considerably more than the 1,390 hour per year for the average Germany worker.

Likewise, expenditures on active labor market policies are no higher in France than in Germany. And the ratio of longterm unemployed persons in France is still lower than Germany’s. How about public debt? France’s net sovereign debt abroad amounts to as little as 9% of GDP, according to UniCredit Chief Economist Erik Nielsen.

If French companies have lost market share, then this is likely to be largely due to the fact that they are less specialized, deliver poorer quality and are therefore more susceptible to cheap providers or soaring exchange rates than their well prepared German rivals. German firms have lucked out during this cycle because they offer precisely the kind of investment goods the investment boom

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in the emerging markets demands.

This was why the French and the Italians were hit harder when the euro appreciated by a trade-weighted 40% between 2000 and 2008, making European products more expensive across the globe. It is no coincidence that the collapse in French market share occurred almost in tandem with the euro’s rally.

Of course, if France had -as Germany does- a backbone of highly specialized small- and medium-size enterprises that also happened to be world market leaders in their industrial segment, they would be able to sell their wares at pretty much any price. But that is an impractical suggestion. The real question is whether pursuing such a strategy would not cost France more than it would stand to gain from it.

Part of Germany’s success story appears to be a kind of response to pent-up demand after a number of lost years of growth.

What really counts, however, is the longterm scorecard. And that, it turns out, shows some quite amazing results.

Eleven per cent per annum more is invested in France’s economy today than during the boom year 2000. In Germany, the comparable figure amounts to just 3.3%. In other words, the latest increases in Germany have only been sufficient to make up for the loss sustained until 2005.

Conversely, in spite of the current economic doldrums in France, 3.8 million more people are employed today than in 1993. It should also be noted that between 1997 and 2008 the unemployment rate was lower in France than it was in Germany.

All in all, France’s GDP today is 38% higher than it was in 1990, while Germany’s has risen less than 30%. The German economy will have to continue booming for a number of years until the gap is finally closed. This makes it even more doubtful whether it is really is so desirable for the French to emulate the Germans.

France’s growth advantage

“Both countries function according to two completely different patterns in economic terms,” says economist Véronique Riches-Flores of Société Générale. Whereas in Germany roughly 50%

Francois Hollande of aggregate economic output goes into exports, this figure amounts to just 27% in France. Accordingly, in arithmetical terms alone, a great deal more export impetus will be necessary to sustain the entire economy.

Basically, Ms. Riches-Flores believes the French economy is much more diversified -not only in the field of exports and industry, but also service providers, consumers, the tourism industry and the real-estate sector. That is no wonder, considering that the French have what is increasingly rare among European economies -a growing population.

And, as is the case with the United States, that is a potential growth advantage for years to come.

Just how quickly a heavy reliance on exports can become a liability is shown by the downturns in Germany in 2009 and 2011. If and when the level of international demand declines, then even the supposedly robust German economy will stagnate at a breathtaking pace.

Last year saw a contraction from record growth figures within months. In con-

trast, the French economy continued to expand throught the winter.

This does not mean that jump-starting the French economy is not an urgent matter. However, the deeper-seated problem of exports does not appear to be the crux of the issue at all. The acute dilemma lies in the effects of an overvalued currency -and the fact that the French are going into consumer strike mode out of sheer panic.

This kind of situation will not be remedied by preaching austerity and calling for oom-pah band-style reforms according to a German model which the French have already emulated, in part, for some time -and which has not really resolved the crisis.

*Thomas Fricke has been with the Financial Times Deutschland since the start in 1999. He writes a weekly column on the business cycle, economic policy and international economic issues.

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special report

EU needs ‘Skills for Growth’ and an important role for the business community

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special report

By N. Peter Kramer

Is the EU still a world player? Yes of course! But.. not the only one. And not because the EU is a strong ‘block’ but there are a few strong member states playing a role in the world while others suffer from extremely high unemployment rates, especially among young and often high educated people.

The positive result of EBS 2012 was the clear focus on the role of Business.

Business leaders have to take their responsibility and be more involved in education governance instead of cutting back on education spending.

As Rudi Thomaes, CEO Federation of Enterprises

in Belgium, stated: the single market is may be a success for goods, it failed for talent. It is also clear: it is better not to leave it to the European Institutions; they produced in the meantime more than enough white papers, strategies etcetera.

Europe needs again an initiative of the Business side; like the one of the European Round Table in the beginning of the nineties: European Captains of Industry presenting the blueprint for the single market.

Traditionally, EBR pays also in 2012 attention to the EBS and tries to give you with this special report a view on some of the topics.

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special report

EBS opening: a wake-up call for the European business community It is not polite to write this down, but after an interesting opening speech by Pierre Alain De Smedt, President of the Federation of Enterprises in Belgium (FEB), the Belgian and Italian Prime Ministers, Di Rupo and Monti, and the President of the EU Council Van Rompuy didn’t bring news or anything new to the audience. De Smedt’ s appeal to the European business community came back in other sessions and maybe it will be a wake-up call.

A wake up call we need in the EU.

By N. Peter Kramer

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To

a distinguished audience including His Royal Highness Prince Philippe of Belgium De Smedt said in his opening speech that the business community has an important stake in the European agenda and entrepreneurs should help to set the priorities. The rest of the world will not wait for Europe and immediate action is needed not only in terms of financial stability but also in terms of sustainable growth. This will be built on the solid foundation of the hard work of Euro-

pean talent that has to continue to be the best in the world.

De Smedt emphasised dramatic youth unemployment figures in several European countries and said that thousands of university graduates loo to the Far East or America for their future. The simple reason is the lack of perspective at home and this should be a wake-up call.

Belgium Prime Minister Elio Di Rupo paid tribute to the Business Summit saying that he was excited by the prospect of having issues rose “that are important to us all”. The summit was an ambitious challenge. He expressed concern for people whose standard of living is being reduced and for young people who are not working. In the present climate entrepreneurs are unable to release their ability and creativity. In order to take the road to growth all ideas have to be realised and applied intelligently to put Europe back on the road to recovery.

The Prime Minister highlighted Europe’s human capital as its great strength. The key challenge is to ensure that the European Commission with the business sector and national leaders are able to create a new dynamic process. He said that some European countries had cut their research budgets and as a consequence their economies

special report

had fallen and that, he declared, was the opposite of what should be done. He added that he is calling on EU leaders to adopt the 20-20 strategy. Belgium is

that Europe needs policy for growth but does not need policy that only gives the impression of growth. Business has a key role to play but at the corporate

taking action to support the proposals of the European Council and the European Parliament.

The challenges facing Europe are not temporary, he warned. Belgium is 5th in the league table for research and training. “We need more people with technical skills, we need more engineers and scientists and we need to encourage young people to study,” he said.

Italian Prime Minister Mario Monti opened saying that skills were the key to European recovery but he said that there was a second form of skill that is needed which he called policy skills.

The way in which policies are applied is key to getting Europe out of crisis.

He also described research, training and universities as a requirement for recovery. Labour reform is also vital and he said that in Italy labour market reform is now before parliament and will quickly be made into law. M. Monti highlighted a number of policy needs across Europe. Apprenticeships need to be promoted but with care taken to ensure that they are not used as a source of cheap labour as has sometimes been the case in the past.

Labour flexibility is essential but there is also a need for security in terms of work. Returning to policy skills he said

level there is likely to be resistance. It will be necessary to overcome strong resistance from those that are not going to benefit from necessary changes and their voices will be more powerful and louder than the young or less privileged.

A policy to be avoided is the illusory demand for expansion leading to budgetary deficits. Measures to bring economies out of deficit are deflationary, he admitted but he added that demand is needed and the need is to cater for categories of expenditure that will create expansion of supply tomorrow. This includes looking at the underfunding of the European Investment Bank. “Policy for growth must be the European agenda,” he told the audience.

The President of the European Council Herman Van Rompuy described the Business Summit as “a platform for change”. Europe needs to change and there will e a need to ensure public awareness which will be key. “We need to have rapidly changing measures while keeping the public informed and businesses have a vital role,” he declared.

He spoke of the need for quality growth and fairness. Idea, innovation and skill capital to create investment and markets and that will be the combination for growth and jobs. When things go

well it is easily forgotten that there needs to be budgetary discipline and that is the basis of confidence. Crisis in the economy and sovereign debt need to be contained and Europe needs to help employers absorb the shock.

There is now a growth debate across Europe but in fact it was never absent.

Now the European Central Bank is stretched close to the limit. There are no magic formulas. Economic measures take time and so does there impact on growth and jobs. The road may seem steep but he urged business leaders to look at how far Europe has already travelled.

The Baltic states took tough economic decisions and now growth is back. He listed other European countries that have dealt with economic problems and said that a lot is being done with member states learning from each other. At the EU level decisions are being made as, for example, the need for reform of the patent system. “The cost of obtaining a patent in the EU is 20 times higher than in the US or Japan and the Council will cut the cost by 80 percent”, he announced.

Saying that international trade is vital for the EU and that China has much untapped potential he noted that there are two million job vacancies in the EU. “We must ensure that the European work force remains the best skilled ad we must make it easier to get the first foot on the ladder. You may have idea and skills but without capital you cannot use them.”

Work on stability is unfinished. There needs to be a more integrated financial sector framework. He too focussed on the European Investment Bank pointing out that it is the biggest in the world and lends directly to banks allowing them to invest in business. The bank needs more capital without which “we should soon be scaling down”.

He told the audience that it is clear that the stakes are high. “Europe needs economic growth and we can deliver it,” he assured them. He told entrepreneurs to make their voices heard. There is fear but Europe needs a message of hope.

“Hope is an attractive idea and we should remember that we are masters of our own future”.

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special report

Accenture/FEB Survey:

‘Employers cut training investment despite skills shortages’ Eighty six (!) percent of European employers have cut or frozen spending on skills and training in the last 12 months despite a continued concern over skills shortages, according to new research by Accenture commissioned by the Federation of Enterprises in Belgium (FEB) for the European Business Summit 2012. The report urges actions to enhance Europe’s skills market.

By EBR

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he survey of 500 senior decision makers from European businesses, government agencies and civil society organisations reveals that only 18 percent of companies and bodies plan to increase spending on skills and training over the next 12 months.

Yet, 43 percent of them currently face at least moderate skills shortages and 72 percent of respondents say Europe’s businesses, policy makers and civil society organizations need to increase investment in this area.

“There’s a double paradox in that European businesses are cutting back on skills development at the very time when they should invest more; and

skills shortages are persisting in spite of a very large pool of unused talent here and across the world,” said Mark Spelman, managing director Strategy of Accenture. “Employers recognise the need for counter-cyclical investment in Europe’s human capital, but are struggling to find solutions. Getting Europe’s skills markets to work better would unlock new enterprise, economic growth and job creation.”

According to Accenture analysis in the report, if Europe’s annual GDP growth rate was 0.5 percent (more than the zero growth forecast by the European Commission for the EU in 2012), it would take until 2019 for Europe to restore employment levels last seen in 2008. It would require two percent annual GDP growth to reach pre-crisis levels of employment by 2014.

The Accenture report, “Turning the Tide: How Europe Can Rebuild Skills and Generate Growth” analyses three key challenges of Europe’s skills markets that can be addressed through solutions built on improved insight and collaboration: Untapped pool of talent: Employers are not sufficiently exploiting the available skills of many of Europe’s 25 million unemployed people or the additional

special report

15 million who would like to work but who have withdrawn from the labor force owing to a lack of opportunity (including older people, mothers and youths). The report claims that employers tend to treat these very different groups as a largely homogeneous group and are therefore failing to recognise or address the variety of skills challenges.

For example, 67 percent of decision makers surveyed think that employers undervalue the skills of older age groups.

Poor labor mobility: While 47 percent of organisations surveyed admit they utilize the skills available within their country to a great or significant extent, this figure falls to 28 percent for those exploiting the wider European labor market. Cross border mobility is not the only problem. Many employers struggle to lower their own internal barriers and do not effectively measure or track skills within their own organisations.

A lack of collaboration between sectors: While almost two thirds of respondents agree that Europe’s skills challenges can only be solved through collaborative solutions between multiple stakeholders, only 29 percent collaborate with other organisations in their sector and just 18 percent with those in other sectors.

“Europe may have been facing constraints on financial capital, but it does not need to face a similar constraint on human capital,” said Rudi Thomaes,

chief executive officer of the Federation of Enterprises in Belgium. “Europe can improve the value, liquidity and the efficient allocation of its human capital if it takes urgent action that centers on collaboration between all sectors and players.”

The need for all sectors of business, education and government to work together is reinforced by the fact that 63 percent of surveyed decision-makers say that Europe needs to recognize that skills challenges will be solved only through system-wide collaborative solutions. Fifty five percent of businesses believe that they need to take a key leadership role in convening multi-sector skills initiatives.

“It’s clear that employers not only recognise the challenges, they also intend to take the leading role in addressing them,” said Mark Spelman. “Short term economic needs and the increasing pace of industrial change means that Europe must build an adaptable, transparent and connected skills ecosystem. This can only be achieved by bringing together business, government and educational groups in ways that can anticipate changing market needs as well as react intelligently to them. Policy makers will play a critical role in enabling this collaboration and removing some of the structural barriers from Europe’s skills market.”

Visit www.accenture.com/turningthetide to learn more about the research. *Accenture is a global management consulting, technology services and outsourcing company, with more than 246,000 people serving clients in more than 120 countries. Combining experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$25.5 billion for the fiscal year ended Aug. 31, 2011.

Its home page is www.accenture.com *The Federation of Enterprises in Belgium (FEB) is the only multi-sector employers’ organisation representing companies in all three regions of Belgium. Its members, Belgium’s leading sector federations, represent companies in key industrial and service sectors. FEB has 35 full members, all of which are professional sector federations, as well as a number of applicant and corresponding members. All in all, it represents more than 48,000 businesses, of which 41,000 are small or medium-sized enterprises. FEB represents more than 75% of the workforce in the private sector and represents companies in ca. 150 national, European and international bodies. Its home page is www.feb.be

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special report

What can Europe learn from other world players?

Global overall growth comes increasingly from emerging markets and not any more from Europe. But, during a very interesting EBS session, a panel with business representatives leading other world players concluded that Europe’s has a potential in fantastically qualified professionals and in generally happy people. ‘Let’s learn from each other and let’s work together’, was the message.

By EBR

“It

is about creating a business model whereby a small portion of people move and many more work together’, explained Natarajan Chandrasekaran (CEO Tata Consultancy Services). ‘Jobs will not be where people live but everywhere and that is to be tackled through processing.

People are moving to where the jobs are.

Europe is India’s largest trading partner.

Europeans could aim at tapping more of the potential of the Indian market where jobs are being created”.

Mr. Chandrasekaran’s second point was: “Matching skills with mobility creates a workforce that takes advantage of global opportunities. Regional clusters have to be connected with education and research and development must be integrated in higher education to bring about private research centres. Advanced

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skill training must be integrated with local community education centres to create favourable conditions for advanced manufacturing. India prides itself to have a global workforce. A prerequisite is a large number of graduates”.

“Brazil has a strategy of bringing in business in less developed regions’, said Joao Pedro Taborda, Chairman Embraer Aviation Europe. ‘Currently we, as a Brazilian airplane manufacturer, are building a plant in Portugal. High-skills labour is no longer cheap in Brazil. The environment is very competitive and demanding in terms of technology, He wished for solutions to the threats of deindustrialisation”.

“Talents and skills risk being underutilised. Empowering the end user entails a mindset whereby knowledgeable users develop an attitude towards risk-taking.

The only way we change is down to taking more risks and working better with our communities. Flexibility and mobility are important”, claimed Harry van Dorenmalen, chairman of IBM Europe. In his view new ICT jobs will appear most of all in the healthcare sector.

“Experts warn against counting only skilled workers. What matters is the skill sets possessed by a great number of people, not just the highly skilled few”, stressed Jonathan Sallet (Partner O’Melveny&Myers). “The working environment is still critical in terms of creativity. Universities have to be brought into job creation. In the United States, the governments spend a lot on basic research and development and 60% of those funds go to the universities. Students see for themselves what kind of research can be conducted and that breeds a culture of entrepreneurship.

Also failed start-ups serve to bring on new ideas. “Angel funding” is an American approach of encouraging people with small amounts of private money. Also national governments have to keep up support”.

“Conventional wisdom should not act as a constraint. The same patterns should not be repeated over again. Businesses and products must be rethought in a different way. But the good news is that Europeans are statistically known to be happier than Brazilians. Social tools might be useful”, ended Taborda. “We have to bring people together to see that potential”.

special report

Dual Education System: Jobs for Youth, Skills for Companies Is the dual education system which combines apprenticeship programs and university education a solution for youth unemployment? In some EU countries this system is succesful; other EU countries are looking to adopt the system.

By EBR

J

orn Neergaard Larsen, Director General of the Confederation of Danish Employers answered the question by explaining that companies need young people, who he termed “the innovators of our future”. However, he explained that current education systems are not good enough at giving young people the skills businesses need. A dual system teaches students the skills and attitudes that employers need from their employees.

He continued, stating that long term youth unemployment poses a long term risk to the EU’s innovation. By combining education with the needs of the labour market he said, we could end the situation where we have both high youth unemployment and unfilled vacancies due to there being a lack of skills on the labour market.

Asked what the position of the European Commission is, Jan Truszcynski (Director General of DG Education and Culture) explained that education remains firmly on a national level, the commission is limited in what it can do. However, he did highlight some of the measures the Commission has taken such as material support for tackling youth unemployment through the European Social Fund and structural funds to help ‘steer member states towards better uses of on the job training and apprenticeship schemes’.

Gerhard Braun (CEO of Braun GmbH & Co. KG and Chair of BDA Education & Training Committee) stated that he is convinced that the success of the German economy is due to the dual education system they have in place. Bearing in mind that it is a very expensive system, he said that Germans think their investment is very worthwhile. Citing Germany’s low

youth unemployment rate, he called for the rest of the world to introduce a dual system.

Federico Vione (Adecco, Head of Italy, Eastern Europe and India) told the audience that Italy, where is no dual system, companies like his could help to bridge the gap between education and business’ needs, especially in the short term. He cited the vast amount of training and investment Adecco makes in helping their clients hire the right candidates saying that a dual education system is a long term solution to a problem that is here now.

Valentin Vogt, President of Swiss Employers’ Confederation, said that the dual system has really helped keep youth unemployment low in Switzerland and counts as a major competitive factor for the Swiss economy. He explained that skills education has to happen close to companies as it is also about the social aspects of fitting into a job such as learning to communicate, learning processes and how to motivate oneself as much as it is about technical know-how.

Jan Truszcynski weighed in on the social changes that are needed to favourite dual education in Europe. In spite of the positive practice in for instance Switzerland and Germany, the European Commission official persisted in his opinion that the system couldn’t be legislated without first changing social attitudes.

The panel concluded that it is of vital importance to bridge the gap between education and business and that social attitude will have to change in order to help achieve this. The implementation of a dual system requires social, business, union and education systems to accept the system if it is to succeed and the panel shared the view that this could not happen overnight.

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interview

Lena Mamidaki MAMIDOIL JETOIL S.A. - Marketing and Communications Director “whatever problems this recession has created, we have to fight to overcome them” Lena Mamidaki was born in Thessaloniki. She graduated from Boston University with a B.Sc. in Business Administration and after having worked briefly in London for a shipping company, she continued her studies at the University of Reading where she received a M.A. in European and International Studies. She worked for VITOM S.A. from 1991 as an Assistant Manager in the Marketing and Exports department and in 1996 she begun working for the petroleum trading company MAMIDOIL JETOIL S.A. as a Marketing

By Anthi Louka - Trikouki

and Communications Director. Since 2009 she has also been appointed CSR Director. She speaks English fluently, has a very good knowledge of the French language and basic knowledge of the Spanish language. In 2009 she received accreditation as a CSR Practitioner from IEMA (Institute of Environmental Management and Assessment). She is a member of the BoD of MAMIDOIL JETOIL S.A and HERMES S.A. and since May of 2006 she is a member of the General Council of SEV. She is married and has one daughter.

MAMIDOIL JETOIL is an entirely Greek family business, founded at the end of the 60s. How difficult is for a Greek business to become and stay competitive in today’s globalised market? What are the challenges?

Up until recently I would have replied to your question by stating that challenges are also opportunities. It doesn’t matter which country you come from.

What’s important is to identify the opportunities, set the goals and the strategy and pursue them. Unfortunately, the serious economic crisis we have been faced with the past 3-4 years has changed things around, at least for us.

We are actively involved in the trading of petroleum products in Greece and the Balkan region. We buy cargoes internationally and need to open L/C’s as guarantees. However, this had become extremely difficult as of late, with Greek bank L/C’s not being accepted by in-

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ternational clients and by international banks not issuing guarantees to Greek companies, considering them as “hot potatoes”. This has caused a serious hindering of our business, as we have had to limit the import of cargoes which is an important part our business.

Are you operating also abroad?

We have been trading in the Balkan region since the 70’s. Through subsidiary companies, MAMIDOIL JETOIL S.A., has expanded its business by owning and operating tank farm installations in Albania and Kosovo, while trading directly to clients in Bulgaria, FYROM and Serbia through our tank farm installation in Thessaloniki (the single largest of its kind in Greece). There is opportunity in these markets, but there is also risk involved. We decided a long time ago to take the risk and in most cases, it seems to be working.

interview

For more than 40 years, MAMIDOIL JETOIL has not just met the needs of drivers; it has also met the needs of clients sailing the sea. Thus, by way of two distinct activities, MAMIDOIL JETOIL is in a position to supply fuel for both yachts and fishing boats as well as sea-faring vessels and coastal freighters. What is the situation at the moment?

How much has recession affected your endeavors?

MAMIDOIL JETOILs’ scope of business covers land, sea and air, when it comes to fuels. We only entered the aviation fuel sector a couple of years ago, but otherwise we have been in the business of trading petroleum products for over 42 years. We have gone through thick and thin, as times have changed and we are here to stay. That means that whatever problems this recession has created, we have to fight to overcome them. The domestic market consumption has dropped by an estimated 20-25%, there is severe shortage of cash and we have to chase after our clients to get paid. Banks can no longer support businesses that are cash intensive, in the most part, nor can they finance big investments. We have plans to build tank farm installations in Crete and in Serbia, but these will probably have to be put off for a while. L/C’s from Greek banks are not accepted and Greek businesses are being avoided by foreign banks. And yet we fight on because this is what we must do. We owe it to the founders of the business, to the shareholders and to the employees of our company.

MAMIDOIL JETOIL has adopted and implemented the ten principles of the UN Global Compact of which it has been a member since April 2010. At the same time, the company has established a Code of Conduct concerning relations with Employees, Suppliers and Clients. Could you please tell us a bit more about these activities? Why do you think it is important for a company to be socially responsible?

Corporate Social Responsibility has become part of our strategy in the last 5 years and after making this important decision, adopting the 10 principles of the UN Global Compact and establishing a Code of Conduct for Employees, Suppliers and Clients was the next logical step. Giving back to society has always been in the heart and minds of the founders of the company. Adopting CSR principles came “naturally”.

Our CSR strategy revolves around 4 main pillars, Employees, Market, Environment and Society and to that effect we have set KPI’s and undertaken projects in order to achieve them.

We are the first Greek petroleum trading company that has adopted a programme for the measurement and off-setting of private tank truck fleet CO2 emissions. In 2011 we extended the programme to gradually include the vessels with which we supply our customers with marine fuels (all vessel emissions will be fully off-set by 2013). We measure our carbon footprint and have set goals to reduce it in our offices in Athens and Thessaloniki. The remaining emissions will be off-set. Regarding our Employees, we provide educational opportunities, extra health insurance, conduct Employee satisfaction surveys every two years, among other things. In the past couple of

years we have tried to encourage Employees to volunteer for projects close to their hearts and interests. In terms of the Market pillar, we have contacted all our suppliers and advised them of our CSR commitment and have gradually started to inform them about the 10 UN Global Compact Principles, requesting that they adhere to them in order to continue working with us. We have also sent them our Code of Conduct so that they know what to expect when working with us and what we expect from them. For the first time at the end of 2011 we conducted a Customer satisfaction survey. As a consequence of the financial crisis we shifted part of our CSR budget in 2011 and 2012 towards covering the needs of groups and individuals hit hardest by this crisis. As a result we increased the quantities of free heating fuel to schools, organisations, NGOs and other parties. Companies today have to be socially responsible. Companies are part of society. Their operation affects society directly or indirectly and matters arising from this influence have to be addressed effectively by enterprises in order to exist in harmony and in order to contribute to a prosperous and sustainable future.

According to the EU, energy is no longer a purely industrial issue for member states to solve independently. So, energy is now a central policy that has many social, economic, financial, environmental and cultural ramifications that no single member state or operator can address separately or on its own. How familiar are businesses and their executives about decisions taken in Brussels? What is the effect of these decisions to both your everyday job routine and the strategic planning?

Energy in all its forms and shapes is crucial to our everyday living and even more so, when it comes to the future. I do agree that it is too big and important an issue to be handled on a local level when it comes to strategic planning and major decisions that might have social, financial and environmental impacts and therefore should be addressed at the highest centralized level. Of course these decisions affect us on various levels, but as a relatively small local player we cannot effect these decisions. We do monitor decisions and discussions on energy issues, primarily through SEEPE (Hellenic Petroleum Marketing Companies Association of which JETOIL is a member) and EUROPIA. EUROPEANBUSINESSREVIEW

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management

Investors want CEOs to engage in EU Policy debate According to the latest research from FTI Consulting*, investor interest and enterprise value benefit from active Policy Involvement and investors expect more face-to-face engagement with policymakers. In the absence of reliable information, investors are inclined to think the worst of the situation in the Eurozone, but added value of the Euro remains, is another result.

By N. Peter Kramer

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ighty-nine percent of global institutional investors believe that companies need to be more vocal about the potential impact of policy changes on their business to investors, yet only 8% believe that companies currently do this very well, according to the latest research from FTI Consulting, the global business advisory firm dedicated to helping organi-

sations protect and enhance their enterprise value.

The research highlights that investors are expecting some form of engagement from CEOs on the public policy debate. Nearly a third (28%) expect significant contribution, and almost two-thirds (63%) expect a moderate contribution to relevant policy discussions. A further 40% of investors believe that CEO involvement in a policy debate will have a positive impact on the wider business environment, and only 10% believe it could be negative.

On the global economic outlook, investors in the European Union (EU) and North America are more negative about the consequences of political decisions that will be taken in the coming five years than their Asian and Latin American counterparts. In the absence of reliable information, investors are inclined

management

to think the worst of the situation in the eurozone.

On corporate governance, executive compensation is and will remain high on the investor agenda — an annual say-on-pay vote on executive compensation is increasingly important for investors. Consistent with a requirement for increased transparency, disclosure and accountability, 58% of investors responding to the FTI Consulting survey indicate that companies should undertake corporate governance road shows every year. The research finds that on the issue of remuneration, investors are starting to use their voting power to make their wishes known to boards. Seventy-two percent of investors think a threshold of below 30% is enough to warrant a corporate response.

Julia Harrison, Senior Managing Director in the Strategic Communications practice of FTI Consulting in Brussels, commented: “Our research shows that investors expect CEOs to be more proactive and engage directly in the policy debates that are likely to impact their businesses. Nearly two-thirds of investors in the EU expect that policy decisions in the EU will negatively affect their decisions to invest in Europe. This makes it all the more important that the European business community participates actively in shaping European policy at the most senior level.”

Investors: better for countries to stay members of the Eurozone

The FTI Consulting research shows that nearly half (47%) of investors think a country leaving the Eurozone will be worse off.

However, 77% of investors in Western Europe are prepared to take advantage of investment opportunities with various Euro and other EU country scenarios.

Hans Hack, Senior Vice President of FTI

Consulting in Brussels, said: “At a time when the fundamentals of the euro are being discussed, it is interesting to see that many investors see the benefit of having and keeping the euro.”

Investors should step up to the plate to improve corporate governance strategies

The FTI Consulting research indicates that 92% of investors in Western Europe believe that institutional investors should play a stewardship role in investee companies, 87% feel investors should help achieve long-term sustainable value and 80% feel they should help curb excessive risk taking. Board directors no longer can rely just on written communications with shareholders. Ninety-two percent of the investors surveyed in the region say that companies need to engage in corporate governance road shows with major shareholders, with over half (58%) expecting such activity once a year. Moreover, shareholders want to hear more from the chairman: fifteen percent expect the chair to be constantly accessible, and, overall, 92% expect to hear from a chairman at least once a year.

“Investors expect themselves to assert influence in the policies of companies. As you can see in practice, they act increasingly according to these beliefs. Corporate governance and executive remuneration in particular, is a subject that requires greater transparency, disclosure and dialogue. There certainly are instances where company performance and executive remuneration are misaligned, and we believe that the long-term interests of companies and their owners are best served through constructive and continuing discussion. Voting against a say-on-pay resolution may be warranted, but it can be a blunt tool

for shareholders to engage in dialogue with the companies they own,” Hack added.

*About the Research

The Strategy Consulting and Research team at FTI Consulting surveyed more than 170 institutional investors based in Europe, North America, Asia and Latin America between 16 April and 4 May 2012 on issues that include corporate governance, shareholder stewardship, and investment trends and expectations for 2012.

Sixty percent of respondents were portfolio managers at institutional investment firms. A further 25% of respondents were hedge funds, and the remaining respondents were private wealth managers and other investors. The average assets under management of respondents were USD $30 billion, and more than 60% of respondents managed funds in excess of USD $1 billion. Almost 90% of respondents were based in Europe and North America, with other respondents being based in Latin America and Asia.

*About FTI Consulting

FTI Consulting, Inc. is a global business advisory firm dedicated to helping organisations protect and enhance enterprise value in an increasingly complex legal, regulatory and economic environment. With more than 3,800 employees located in 24 countries, FTI Consulting professionals work closely with clients to anticipate, illuminate and overcome complex business challenges in areas such as investigations, litigation, mergers and acquisitions, regulatory issues, reputation management, strategic communications and restructuring. The company generated $1.56 billion in revenues during fiscal year 2011. More information can be found at www.fticonsulting.co.uk

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Financial Capitalism:

A Safe Venue for Power Struggles Without Violence 46

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management

Finance is supposed to reduce randomness in our lives, not increase it. That is why the democratization of finance requires relying more on effective institutions of risk management. Robert J. Shiller foresees a world of finance that would have the effect of preventing random redistributions of power and wealth.

By Robert J. Shiller*

T

o make the financial system work well, we have to make a leap of faith that is not easy to make, especially in light of the recent profound failures in the world of finance. We need to further develop the inherent logic of finance, its own ways of making deals among ultimately independent and free people -deals that leave them all better off.

The democratization of finance calls for an improvement in the nature and extent of participation in the financial system, including awareness of fundamental information about the workings of the system. The public needs to have reliable information, and that can only be provided by advisers, legal representatives and educators who see their role as one of promoting enlightened stewardship.

When people can benefit from such help, they will come to feel less strongly that our economy is run by a power elite. At present, most people have little or no such information. Instead, they are routinely confronted by salespeople for financial products, who have inadequate incentives to tell them what they really need to know. But it could be different, under a truly enlightened system of financial capitalism.

To make that a reality, some government interventions are needed, includ-

ing redistributions through a progressive income tax. This could be done more deliberately and judiciously than it is at present, without raising alarms that wealth might be unfairly confiscated.

Current economic realities are such that it is hard for anyone to escape the realization that there needs to be a social safety net, and that this safety net has to be continually improved and reworked.

At the same time, we need to recognize that, under financial capitalism, many of our best protections, and inspirations, come not directly from the government, but from our own private financial arrangements. The government can merely be a facilitator.

The democratization of finance works hand-in-hand with the humanization of finance. To that extent, it is important that finance be humane, and that it incorporate our increasingly sophisticated understanding of the human mind into its systems, models and predictions.

The rise of behavioral economics and neuro-economics in recent decades provides a foundation for such an approach, for understanding how people really think and act. People are not inherently and uniformly loving to their neighbors, but our institutions can be changed to reward the better side of human nature.

Hostage exchange

The rules that regulate financial institutions are like the rules of war. They lessen the unnecessary damage from human aggression and they work to encourage the expression of other, more charitable, human impulses.

Before modern financial capitalism, however, power was wielded in much starker ways. For example, throughout most of human history, hostage exchanges were used to guarantee agreements between governments.

A king might be forced to give up his son to spend years in the land of a rival leader, with the understanding that the son would be killed if the king did not live up to a treaty or other bargain. Because of the outrageous inhumanity of such a practice, it is now eschewed by respectable governments the world over.

But modern finance has not done away with all forms of hostage exchanges to

seal deals. The term for the modernday hostage exchange is collateral, and the hostages are financial assets instead of people. The practice was elevated to a high level before the severe financial crisis that began in 2007, with the widespread use of repurchase agreements (repos) to carry financing farther forward.

Even the home mortgage is, in essence, a medieval-style hostage exchange, one in which the home (and the sense of equilibrium and well-being it provides to its inhabitants) is the hostage.

Ultimately, a well-constituted financial capitalism creates a safe venue for power struggles without violence.

Achieving such a system requires appropriate innovations that humanize finance (including taking account of our increasing knowledge from behavioral economics and neuro-economics).

There is no known economic system that can perfect aggressive human impulses -but they can be softened.

The key to enhancing human values is to maintain and continually improve a democratic financial system that takes account of the diversity of human motives and drives. We need a system that allows people to make complex and incentivizing deals to further their goals.

And it must be one that allows an outlet for our aggressions and lust for power.

It must also be a system that redirects the inevitable human conflicts into a manageable arena, an arena that is both peaceful and constructive.

* Robert J. Shiller is the Arthur M. Okun Professor of Economics at Yale University and professor of finance and fellow at the International Center for Finance, Yale School of Management. He has written extensively on financial markets, financial innovation, behavioral eco­nomics, macro­ economics, real estate, sta­tistical methods, and on public attitudes, opinions, and moral judgments regarding markets.

**Editor’s note: This article is excerpted from Finance and the Good Society by Robert J. Shiller. Copyright © 2012 by Princeton University Press.

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shipping

“Εntrepreneurial, adaptable and innovative instincts are the path to European recovery” Shipping has long shaped the destiny and fortunes of our countries and our continent. With the heritage of great seafaring nations, Greek shipping and British maritime services have evolved as modern, dynamic, world-leading forces in an industry which is at the heart of 21st Century global trade.

By Dr. David Landsman, British Ambassador to Greece

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he bonds between Greek shipping and British maritime services are both longstanding and continuously developing. This year’s British delegation to Posidonia 2012, supported by Shipping Minister Mike Penning MP, highlights the extent of ties – from financing to brokerage, from insurance to anti-piracy.

Resilience, adaptability and entrepreneurial spirit characterise both the City of London and the Greek shipping industry. Despite the intense pressures of the Euro-zone crisis, challenges to global trade and high energy prices, Greek shipping remains a dominant force; Greeks continue to control the world’s largest merchant fleet. The industry has shown it is steadfastly forward-looking.

Seeing beyond the current downturn, Greek shipping has positioned itself well to seize future opportunities; in 2011 Greek ship owners invested

$8.5bn in new orders, diversifying to capture specialist future demand in areas such as LNG shipping.

That London, Europe’s preeminent financial centre, remains the maritime service provider of choice for Greek shipping makes an important statement. The UK continues to deliver excellence in areas of traditional strength. London remains the centre of marine and P&I insurance (20% and 62% of the global market share respectively). Baltic Exchange members are responsible for over half of the S&P market. London is a significant market for ship financing. English law continues to be the shipping industry norm, globally trusted by all maritime sector players. On security, British expertise is at the forefront.

This summer all eyes turn to London as the world’s most talented sports men and women compete in the 27th modern Olympic Games.

Apart from witnessing sporting excellence, London2012 presents a unique opportunity to showcase the United Kingdom throughout the world and to build a legacy of globally competitive and innovative businesses, supported by the British Business Embassy programme of events and the online British Business club offering a range of networking events for those who want to do business with Britain.

Meanwhile - five miles west of the

shipping

Olympic stadium - the City of London continues to attract the most dynamic, highest-performing finance and business talent from across the globe. The maritime services cluster - a building block of the City’s eminence - is no exception. It is at the head of new industry developments; offering leading consultancy and advisory services on environmental compliance and providing world-class education to the next generation of shipping professionals. While any of these elements can be found elsewhere, it is only in London that you can find them all together, and in such depth.

But we are fully aware that there is no space for complacency.

Competition from Asia and other rising powers is intense. The Eurozone crisis has brought Europe’s declining competitiveness - in shipping, services and across the board - into stark focus.

The quest to boost competitiveness and urgently needed growth dominates current European discourse. There can be no one formula for success. But innovative, bold and forwardthinking businesses - exemplified by many in shipping and maritime services sectors - must be at the absolute forefront of efforts to deliver sustainable European growth and jobs.

The primary response of national governments and the EU should be to allow its businesses to flourish on the international stage. Reforming national and European structures to boost competitiveness is at the core of the UK’s growth strategy. Prime Minister David Cameron has consistently argued

the need to liberalise markets, remove barriers to trade and ease the regulatory burden European businesses face.

These arguments have gained significant ground but much work remains to be done if Europe is to retain global economic prowess and exploit, and develop, its comparative advantages. Britain, working with a significant number of EU partners, has been leading efforts to strengthen the EU’s policies to promote growth. To complement our national policies, EU-level action to boost growth - for instance through completing the single market, regulatory reform and promoting trade - is an essential counterpart to national-level actions.

Business must be a crucial voice in this debate. If we are to resist damaging calls for protectionism, it is essential that European business leaders make the arguments for structural reform, liberalisation of European markets and the reduction of excessive regulation that they know to be so costly to Europe’s competitiveness.

In this era of uncertainty, the entrepreneurial, adaptable and innovative instincts I have come to admire in both Greek shipping and the City of London, are the path to European recovery. But the Governments of the EU and the European institutions need to create an environment for enterprising business to flourish and deliver European prosperity and jobs.

The United Kingdom is committed to doing so and welcomes the support of Europe’s business community.

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leadership

Forget What You Know, Remember What You Should Have...

Several years ago, I was asked to write an article on «the consumer, this unknown person1» for a French newspaper. The main point emphasized was that we were about to witness consumer behavior very similar to Dissociative Identity Disorder2, without its pathological consequences. The essential feature of this conduct «[...] is the presence of two or more distinct identities or personality states [...] that recurrently take control of behavior»3. The diagnosis requires that at least two personalities (one may be the host) routinely take control of the individual’s behavior with an associated memory loss that goes beyond normal forgetfulness...

Our identity disorders revealed!

By Harris D. Vourkas

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Until the 90s, the consumer was functioning in a rather faithful way vis-à vis a brand or a product, from fashion to super-market. Do you remember women dressed in Chanel from head to toe (or Dior, or Givenchy, or Thierry Mugler for that matter...), including the associated fragrance and other body products? Do you remember the epic marketing battles between Johnson & Johnson, Procter & Gamble and

Unilever, or those between Coca-Cola and Pepsi in order to attract and retain customers loyal to the brand? Well, the buzz created by the book «No Logo»4 was merely the visible part of the iceberg... You may now forget all prior established positions gained and comfort zones within well-defined segments or target groups... Today’s consumer is able to operate choices in a multi-layered mode: accept simultaneous messages from a wide spectrum of senders, combine at his/her will aspects which may appear contradictory, even absurd.

Hence, what could be the relevance of this past article with today’s issues?

Well, it seems that chronic confusion of communication5 made visible its side effects: on the financial (i.e. «choice of entering/leaving a market/stock»), economic (i.e. «choice of brand/product») and political (i.e. «choice of party/ vote») levels, the liberated consumerscum-citizens use any given information flux at their will, eventually combined at will. This is a major transformation which took place over the last years. We may waive goodbye to the archetypal cleavages6 which produced predictable behaviours and predetermined response to any given stimulus. At the same time, society (accepted here simultaneously as a whole and as the addition of the indi-

leadership

viduals who shape it) is forming a gap which amplifies itself with time: • citizens who confirm -for the first time after WW II- that they are moving ahead of their political, economical and social elites. In a previous EBR article7, some factors were analysed in order to propose an explanation of this profound shift in our societies • opposing this recent development, politicians, CEOs, syndicate leaders are still behaving as nothing has moved from the status quo ante: absence of vision, futile promises, incoherence in action, the list is a long one and known to all...

The time is now...

We are caught today in a simple yet peculiar paradox: the so-called «civil society» (or «citizens», for that matter) have agreed to hand over to their political, economical and social elites8 the design of their future. At the same time, they did not receive the implied benefits of this exchange: to benefit from sound economic management in their countries, to restore their confidence in the future of themselves and of their families, to cultivate an increased awareness of the present, in short...

The recent movements of disapproval in European countries (starting from Spain, then in Italy, in Greece, in France, etc.) demonstrate that social cohesion is at stake. Instead of devi-

“Be the change that you wish to see in the world” Mohandas Karamchand Gandhi ate their attention from issues created from serious ill-management of public resources, as in the past, citizens have identified clearly the present situation, have analysed the various aspects of the problem and start proposing new ideas to deal with those issues... regardless of their elites. The urge for «quick wins» and for enhanced efficiency have revealed the existing «culture bunkers», where lack of exposure with the «real» issues and overprotection from risk9 gradually excluded the elites from everyday’s «smart» solutions.

The active citizen who participates in a constructive way to enhance daily life, who disposes of valuable experience with «cumulative comparisons», who is fed up with incoherence between promises made and concrete actions, has reduced drastically the space for political manoeuvre. Similar to a successful company, time has come for the public sector to incorporate dynamic members of the society in all stages of the decision-making process, from the strategic choices to implementation.

Que faire?

In Ancient Greece, mythology and its

diversity of possible interpretations was used in order to establish a formal perception of the complexity of the surrounding phenomena. One of those myths, the oath made to the dark waters of Styx, had a precise function: the absolute succession of acts following one’s promise. Once pronounced10, the vow -a kind of moral bond, was compulsory for both Gods and humans alike.

We may say that this mythological conception establishes the foundation of a society of law, to be respected among equals, once announced. Well, we may have walked several steps in the path of law since then, however can we establish with certainty that this fundamental relation of trust is respected in full today? In addition, can we fulfil the requirement of action («πράξις», praxis) following the promise («λόγος», logos) made to a counterpart?

Thus far, our institutions have shown their capacity of response in times of growth. But in times of severe crises, where the agreed fundamentals of the social contract operate with difficulty, a wide debate and reshuffle cannot be avoided. This institutional correction may provide the bounce of new social dynamic where multiple competing logics can co-exist, co-operate and co-create.

«Bottom-up» is the only way to go!

In strategy, the pyramid is one of the most well-known pictograms. I have used it myself, as I have seen it to describe almost every layer-based relation

1

«Le consommateur, cet inconnu», in Le Monde -Informatique, 04/1999.

2

DID, also known as Multiple Personality Disorder (F44.8 in the ICD-10 Version:2010 of the WHO).

3

American Psychiatric Association (2000-06), Diagnostic and Statistical manual of Mental Disorders-IV, American Psychiatric Publishing, Inc. pp. 526-529.

4

Naomi Klein, No Logo: Taking Aim at the Brand Bullies, Knopf Canada/Picador, 1999, 490 p.

5

In all four aspects of the SMCR (Sender-Message-Channel-Receiver) Model of Communication, as created by D.K. Berlo (1960), enhanced by D.C. Barnlund (2008) with the

transactional model of communication, which introduces the simultaneous engaging of individuals in the sending and receiving messages between them.

6

Seymour Martin Lipset & Stein Rokkan, Party Systems and Voter Alignments, Free Press, 1967. The four basic cleavages for western civilisation after the Industrial Revolution

were: 1) Owner-Worker, 2) State-Church, 3) Urban-Rural, and 4) Centre-Periphery.

7

«The Fullness of Time ?», EBR No. 1/2012, pp. 30-33.

8

By political elites, we understand mainly the leaders and the administration of the political formations, including their executive arm (ministries, companies of the Public sector,

etc.). By economical elites, we consider the Boards of major companies (CEOs, CFOs, etc.), consultancies, etc. By social elites, we comprehend leaders of Trade Unions and other syndicates, pressure groups, etc. Naturally, one could always bring out an outstanding person or two and argue on the fallacies of this presentation. Unfortunately, though, exceptions do not make the rule, they are merely a reference...

9

After several scandals that blew away this «urban myth» of risk-aversion choices (BCCI, Y2K, Xerox, Enron, Freddie Mac, Merrill Lynch, Arthur Andersen, AIG, Bernard L.

Madoff’s massive Ponzi scheme, Lehman Brothers, etc.), one may observe how overrated and ill-managed was this whole concept.

10

The importance of the word is highlighted in several sacred texts of different religions

11

Grouping of enterprises, conglomerates. Centered on a core bank, the system of combined ownership between the member companies helps insulate each company from stock

market fluctuations and takeover attempts, thus enabling long-term planning in innovative projects.

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leadership

Salvador Domingo Felipe Jacinto Dali i Domènech, Marquis de Pubol (1904-1989) Swans Reflecting Elephants (1937) oil on canvas 51 cm x 77 cm (private collection) from the limited top down to the wider bottom... However, it turned out to be rapidly retrograde to my eyes: the multitude relations and interactions cannot be explained by such a design. Furthermore, the layers of hierarchy links simply miss the quality and quantities of human interactions which make things possible at the end of the day...

Then, one may remember the revolution started in Japan during the ‘70s inside the keiretsu11. The quality circles and the just-in-time (JIT) manufacturing strategy in the automotive industry, the triumph of SONY’s Walkman, were made possible only through the implementation of a radical «bottom-up» approach, redesigning the whole process in order to achieve high ROI, quality and efficiency. Our societies are in an identical situation, where we need to redesign the way we «design», «produce» and «promote» our national and supranational policies. Zero-based budgeting

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(ZBB), accountability for the public expense, project ownership, responsibility for the end-results, transparency throughout the decision-making process, are just few of the models that must be introduced and maintained in all levels of the public sphere.

For how long, the leaders in the EU (at national and supranational levels) have the intention to remain with their eyes wide shut, their ears wide sealed, their mouths wide blocked to this «inconvenient truth»?

«Hic et nunc» (here and now) is considered to be one of the most mystic truths of the Ancient World. It stresses out the urgency of action on-the-spot, right away. Yet, its very simplicity makes it the perfect oath for any results-committed person, citizen and leader alike, much needed today to be an enthusiastic constituent of significant positive shift in our policies, our economies, our civilisation... Then, when you have finished

reading this article, DO IT for yourself, for your close circle, for your friends and for the society you live in! NOW!

Harris D. Vourkas is a strategy consultant for major European companies and policy advisor to Governments and local authorities.

On November 11, 2011, he founded the non-for-profit «ATHROISIS - Growth for Greece» in order to promote a new development model for his country, based on sector planning, results-orientation and accountability in the public management.

Born in Thessaloniki in 1966, he holds degrees from the ULB, SciencesPo Paris & the French ENA. e-mail:harris.vourkas@athroisis.eu

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trends

Demystifying social media As the marketing power of social media grows, it no longer makes sense to treat it as an experiment. Here’s how senior leaders can harness social media to shape consumer decision making in predictable ways.

By Roxane Divol, David Edelman and Hugo Sarrazin*

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E

xecutives certainly know what social media is. After all, if Facebook users constituted a country, it would be the world’s third largest, behind China and India. Executives can even claim to know what makes social media so potent: its ability to amplify word-of-mouth effects. Yet the vast majority of executives have no idea how to harness social media’s power. Companies diligently establish Twitter feeds and branded Facebook pages, but few have a deep understanding of exactly how social media interacts with consumers to expand product and brand recognition, drive sales and profitability, and engender loyalty.

We believe there are two interrelated reasons why social media remains an enigma wrapped in a riddle for many executives, particularly nonmarketers. The first is its seemingly nebulous nature.

It’s no secret that consumers increasingly go online to discuss products and brands, seek advice, and offer guidance.

Yet it’s often difficult to see where and how to influence these conversations, which take place across an ever-growing variety of platforms, among diverse and dispersed communities, and may occur

either with lightning speed or over the course of months. Second, there’s no single measure of social media’s financial impact, and many companies find that it’s difficult to justify devoting significant resources -financial or human- to an activity whose precise effect remains unclear.

What we hope to do here is to demystify social media. We have identified its four primary functions -to monitor, respond, amplify, and lead consumer behaviorand linked them to the journey consumers undertake when making purchasing decisions. Being able to identify exactly how, when, and where social media influences consumers helps executives to craft marketing strategies that take advantage of social media’s unique ability to engage with customers. It should also help leaders develop, launch, and demonstrate the financial impact of socialmedia campaigns.

In short, today’s chief executive can no longer treat social media as a side activity run solely by managers in marketing or public relations. It’s much more than simply another form of paid marketing, and it demands more too: a clear framework to help CEOs and other top executives evaluate investments in it, a plan for building support infrastructure, and performance-management systems to help leaders smartly scale their social presence. Companies that have these three elements in place can create critical new brand assets (such as content from

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customers or insights from their feedback), open up new channels for interactions (Twitter-based customer service, Facebook news feeds), and completely reposition a brand through the way its employees interact with customers or other parties.

The social consumer decision journey

Companies have quickly learned that social media works: 39 percent of companies we’ve surveyed already use social-media services as their primary digital tool to reach customers, and that percentage is expected to rise to 47 percent within the next four years. Fueling this growth is a growing list of success stories from mainstream companies:

Creating buzz: Eighteen months before Ford reentered

the US subcompact-car market with its Fiesta model, it began a broad marketing campaign called the Fiesta Movement. A major element involved giving 100 social-media influencers a European model of the car, having them complete “missions,” and asking them to document their experiences on various social channels. Videos related to the Fiesta campaign generated 6.5 million views on YouTube, and Ford received 50,000 requests for information about the vehicle, primarily from non-Ford drivers. When it finally became available to the public, in late 2010, some 10,000 cars sold in the first six days.

Learning from customers: PepsiCo has used social networks to gather customer insights via its DEWmocracy promotions, which have led to the creation of new varieties of its Mountain Dew brand. Since 2008, the company has sold more than 36 million cases of them.

Targeting customers: Levi Strauss has used social media to offer location-specific deals. In one instance, direct interactions with just 400 consumers led 1,600 people to turn up at the company’s stores- an example of social media’s word-of-mouth effect.

Yet countless others have failed to match these successes: knowing that something works and understanding how it works are very different things. As the number of companies with Facebook pages, Twitter feeds, or online communities continues to grow, we think it’s time for leaders to remind themselves how social media connects with an organization’s broader marketing mission.

Marketing’s primary goal is to reach consumers at the moments, or touch points, that influence their purchasing behavior. Almost three years ago, our colleagues proposed a framework -the “consumer decision journey”- for understanding how consumers interact with companies during purchase decisions. Expressing consumer behavior as a winding journey with multiple feedback loops, this new framework was different from the traditional description of consumer purchasing behavior as a linear march through a funnel. Social media is a unique component of the consumer decision journey: it’s the only form of marketing that can touch consumers at each and every stage, from when they’re pondering brands and products right through the period after a purchase, as their experience influences the brands they prefer and their potential advocacy influences others.

The fact that social media can influence customers at every stage of the journey doesn’t mean that it should. Depending on the company and industry, some touch points are more important to competitive advantage than others. What’s more, our work with dozens of companies adapting to the new marketing environment strongly suggests that the most powerful social-media strategies focus on a limited number of marketing responses closely related to individual touch points along the consumer decision journey. The ten most important responses, range from providing customer service to fostering online communities. One of those ten -monitoring what people say about your brand- is so important that we see it as a core function of social media, relevant across the entire consumer decision journey. The remaining nine responses, organized in three clusters in the exhibit, underpin efforts to use social media to respond to consumer comments, to amplify positive sentiment and activity, and to lead changes in the behavior and mind-sets of consumers.

1. Monitor

Gatorade, a sports drink manufactured by PepsiCo, has been diligently working toward its goal of becoming the “largest participatory brand in the world.” It has created a Chicago-based “war room” within its marketing department to monitor the brand in real time across social media. There are seats where team members can track custom-built data visualizations and dashboards (including terms related to the brand, sponsored athletes, and competitors) and run sentiment analyses around product and campaign launches. Every day, all of this feedback is integrated into products and marketing -for example, by helping to optimize the landing page on the company’s Web site. Since the war room’s creation, the average traffic to Gatorade’s online properties, the length of visitor interactions, and viral sharing from campaigns have all more than doubled.

Such brand monitoring -simply knowing what’s said online about your products and services- should be a default socialmedia function, taking place constantly. Even without engaging consumers directly, companies can glean insights from an effective monitoring program that informs everything from product design to marketing and provides advance warning of potentially negative publicity. It’s also critical to communicate such feedback within the business quickly: whoever is charged with brand monitoring must ensure that information reaches relevant functions, such as communications, design, marketing, public relations, or risk.

2. Respond

Valuable though it is to learn how you are doing and what to improve, broad and passive monitoring is only a start. Pinpointing conversations for responding at a personal level is another form of social-media engagement. This kind of response can certainly be positive if it’s done to provide customer service or to uncover sales leads. Most often, though, responding is a part of crisis management.

Last year, for example, a hoax photograph posted online claimed that McDonald’s was charging African-Americans an additional service fee. The hoax first appeared on Twitter, EUROPEANBUSINESSREVIEW

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where the image rapidly went viral just before the weekend as was retweeted with the hashtag #seriouslymcdonalds. It turned out to be a working weekend for the McDonald’s social-media team. On Saturday, the company’s director of social media released a statement through Twitter declaring the photograph to be a hoax and asking key influencers to “please let your followers know.” The company continued to reinforce that message throughout the weekend, even responding personally to concerned Tweeters. By Sunday, the number of people who believed the image to be authentic had dwindled, and McDonald’s stock price rose 5 percent the following day.

Responding in order to counter negative comments and reinforce positive ones will only increase in importance. The responsibility for taking action may fall on functions outside marketing, and the message will differ depending on the situation. No response can be quick enough, and the ability to act rapidly requires the constant, proactive monitoring of social media -on weekends too. By responding rapidly, transparently, and honestly, companies can positively influence consumer sentiment and behavior.

3. Amplify

“Amplification” involves designing your marketing activities to have an inherently social motivator that spurs broader engagement and sharing. This approach means more than merely reaching the end of planning a marketing campaign and then thinking that “we should do something social” -say, uploading a television commercial to YouTube. It means that the core concepts for campaigns must invite customers into an experience that they can choose to extend by joining a conversation with the brand, product, fellow users, and other enthusiasts. It means having ongoing programs that share new content with customers and provide opportunities for sharing back. It means offering experiences that customers will feel great about sharing, because they gain a badge of honor by publicizing content that piques the interest of others.

In the initial phases of the consumer decision journey, when consumers sift through brands and products to determine their preferred options, referrals and recommendations are powerful social-media tools. A simple example is the way online deal sites such as Groupon and Gilt Groupe provide consumers with credit for each first-time purchaser they refer. Our research shows that such direct recommendations from peers generate engagement rates some 30 times higher than traditional online advertising does.

Once a consumer has decided which product to buy and makes a purchase, companies can use social media to amplify their engagement and foster loyalty. When Starbucks wanted to increase awareness of its brand, for example, it launched a competition challenging users to be the first to tweet a photograph of one of the new advertising posters that the company had placed in six major US cities, providing winners with a $20 gift card.

This social-media brand advocacy effort delivered a marketing punch that significantly outweighed its budget. Starbucks said that the effort was “the difference between launching with millions of dollars versus millions of fans.”

Marketers also can foster communities around their brands

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and products, both to reinforce the belief of consumers that they made a smart decision and to provide guidance for getting the most from a purchase. Software company Intuit, for example, launched customer service forums for its Quicken and QuickBooks personal-finance software so users could help one another with product issues. The result? Users rather than Intuit employees answer about 80 percent of the questions, and the company has employed user comments to make dozens of significant changes to its software.

4. Lead

Social media can be used most proactively to lead consumers toward long-term behavioral changes. In the early stages of the consumer decision journey, this may involve boosting brand awareness by driving Web traffic to content about existing products and services. When grooming-products group Old Spice introduced its Old Spice Man character to viewers, during the US National Football League’s 2010 Super Bowl, for example, the company’s ambition was to increase its reach and relevance to both men and women. The commercial became a phenomenon: starring former player Isaiah Mustafa, it got more than 19 million hits across all platforms, and year-on-year sales for the company’s products jumped by 27 percent within six months.

Marketers also can use social media to generate buzz through product launches, as Ford did in launching its Fiesta vehicle in the United States. For example, social media played an integral role in the success of “Small Business Saturday,” the US shopping promotion created by American Express for the weekend immediately following Thanksgiving (for American Express CMO John Hayes’s perspective on that launch, see “How we see it: Three senior executives on the future of marketing,” on mckinseyquarterly.com). In addition, when consumers are ready to buy, companies can promote time-sensitive targeted deals and offers through social media to generate traffic and sales. Online menswear company Bonobos, for example, provided an incentive for its Twitter followers by unlocking a discount code after its messages were resent a certain number of times. As a result of this effort, almost 100 consumers bought products from the site for the first time. The campaign delivered a 1,200 percent return on investment in just 24 hours.

Finally, social media can solicit consumer input after the purchase. This ability to gain product-development insights from customers in a relatively inexpensive way is emerging as one of social media’s most significant advantages. Intuit, for example, has its community forums. Starbucks uses MyStarbucksIdea. com to collect its customers’ views about improving the company’s products and services and then aggregates submitted ideas and prominently displays them on a dedicated Web site.

That site groups ideas by product, experience, and involvement; ranks user participation; and shows ideas actively under consideration by the company and those that have been implemented.

Converting knowledge to action

Despite offering numerous opportunities to influence consumers, social media still accounts for less than 1 percent of

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an average marketing budget, in our experience. Many chief marketing officers say that they want to increase that share to 5 percent. One problem is that a lot of senior executives know little about social media. But the main obstacle is the perception that the return on investment (ROI) from such initiatives is uncertain.

Without a clear sense of the value social media creates, it’s perhaps not surprising that so many CEOs and other senior executives don’t feel comfortable when their companies go beyond mere “experiments” with social-media strategy. Yet we can measure the impact of social media well beyond straight volume and consumer-sentiment metrics; in fact, we can precisely determine the buzz surrounding a product or brand and then calculate how social media drives purchasing behavior. To do so -and then ensure that social media complements broader marketing strategies- companies must obviously coordinate data, tools, technology, and talent across multiple functions.

In many cases, senior business leaders must open up their agendas and recognize the importance of supporting and even undertaking initiatives that may traditionally have been left to the chief marketing officer. As our colleagues noted last year, “we’re all marketers now.”

Consider the experience of a telecommunications company that proactively adopted social media but had no idea if its efforts were working. The company had launched Twitter-based customer service capabilities, several promotional campaigns built around social contests, a fan page with discounts and tech tips, and an active response program to engage with people speaking about the brand. In social-media terms, the investment was relatively large, and the company’s senior executives wanted more than anecdotal evidence that the strategy was paying off. As a starting point, to ensure that the company was doing a quality job designing and executing its social presence, it benchmarked its efforts against approaches used by other companies known to be successful in social media. It then advanced the following hypotheses: • If all of these social-media activities improve general service perceptions about the brand, that improvement should be reflected in a higher volume of positive online posts.

• If social sharing is effective, added clicks and traffic should result in higher search placements.

• If both of these assumptions hold true, social-media activity should help drive sales -ideally, at a rate even higher than the company could achieve with its average gross rating point (GRP) of advertising expenditures.

The company then tested its options. At various times, it spent less money on conventional advertising, especially as socialmedia activity ramped up, and it modeled the rising positive sentiment and higher search positions just as it would using traditional metrics. The company concluded that social-media activity not only boosted sales but also had higher ROIs than traditional marketing did. Thus, while the company took a risk by shifting emphasis toward social-media efforts before it had data confirming that this was the correct course, the bet paid off. What’s more, the analytic baseline now in place has given

the company confidence to continue exploring a growing role for social media.

In other cases, social media may have a more specific role, such as helping to launch a new product or to mitigate negative word of mouth. Similar types of analyses can focus on mixing the impact of buzz, search, and traffic; correlating that with sales or renewals (or whatever the key metric may be); and then gauging the result against total costs. This approach can give executives the confidence and focus they need to invest more money, time, and resources in social media.

As these social-media activities gain scale, the challenges center less around justifying funding and more around organizational issues such as developing the right processes and governance structure, identifying clear roles -for all involved in social-media strategy, from marketing to customer service to product development- and bolstering the talent base, and improving performance standards. New capabilities abound, and social-media best practices are barely starting to emerge. We do know this: because social-media influences every element of the consumer decision journey, communication must take place between as well as within functions. That complicates lines of reporting and decision-making authority.

If insights from monitoring social media are relevant to nonmarketing functions such as product development, for instance, how will you identify and disseminate that information efficiently and effectively -and then ensure that it gets used? If you spot an opportunity to have a meaningful conversation with a key influencer, how will you quickly engage the right senior executive to follow through? If you recognize a fast-moving service concern, how will you respond rapidly and openly -and when should you do so outside the traditional service organization? Senior executives across the company must recognize and begin to answer such questions.

Social media is extending the disruptive impact of the digital era across a broad range of functions. Meanwhile, the perceived lack of metrics, the fear, and the limited sense of what’s possible are eroding. Executives can identify the functions, touch points, and goals of social-media activities, as well as craft approaches to measure their impact and manage their risks. The time is ripe for executive-suite discussions on how to lead and to learn from people within your company, marketers outside it, and, most of all, your customers. *Roxane Divol is a principal in McKinsey’s San Francisco office, David Edelman is a principal in the Boston office, and Hugo Sarrazin is a director in the Silicon Valley office.

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trends

Short story of converting people into digits Many people complain about the lack of presence of the European Union in the life of ordinary citizens. Many complain that they are actually not aware of what this huge structure of supranational or intergovernmental organisations is doing. Very few precisely understand processes that are ongoing and how the different institutions are interacting.

C

By Miroslaw Krzanik*

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an we then expect that the great dream of ever closer cooperation between peoples of Europe become some day true? Maybe yes, but then the European Union should start being present among its citizens not only among politicians and eurocrats. But for some reasons the European Commission tries to jeopardise work of the very few programmes that addresses directly citizens – programmes for education, youth and mobility.

Since mid ‘80s (back then) the European Communities, with the European Commission taking a lead in the process, has agreed upon creating a programme that aimed to increase exchange between students around Europe. The incentive was not only based on demands of the labour market for mobile and multilingual young employees, but also to actually start implementing the dream of bringing Europeans closer to each other.

That was the beginning of the Erasmus programme. Not much later the European Commission proposed also to create another scheme, this time for youth in general, which would allow youngsters across the continent to learn from their peers and socialise with them. Ever since then the amount of programmes has been only growing, addressing more and more groups of people for whom the most important issue was their selfdevelopment.

Throughout the years the programmes have changed, some of them have been grouped to limit costs of running them.

But the most important distinction has never been questioned. Formal education has always stayed in separation from non-formal education. As commonly agreed they are complimentary to each other, but due to the fact that they addressed different groups and were implemented by different institutions a separation was needed. And the reasoning for it is obvious. How can we expect non-formal education being effectively implemented at universities in the environment being far from non-formal? Or on contrary, would we ever imagine to see an NGO providing a certified degree as a university? The European Commission has always seemed to understand that these programmes are a notion of something much more important than the objectives of increasing mobility of improving educational portfolios of

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young Europeans. These programmes have been teaching them how to look beyond borders of their nation states as something as normal and equal as their home. These programmes have taught people things they would have never learnt in formal education, starting with soft skills on languages finishing.

But in 2008 the global crises emerged.

High ideals stopped being important and people started to look for short-term outcomes. The more measurable the better, the more obvious assessment of advantages is, the better for the project or programme. But the problem with education is that there is no other more long-term investment. Young people are the future of all societies and in most cases it is extremely hard to look at them and say that within 10 years they would achieve this and that. But on the wave of

All the, independent and focused on different aims and objectives, programmes of the past were merged in one superprogramme, with common goals, similar procedures and joint administration. The European Commission assumed that an objective for non-formal education for young people, scholars investigating stem cells and teachers going with their students for an exchange abroad are the same and that it is worth to put all that different groups under one umbrella.

Sounds surprising on the first sight. But the justification stays in-line with everything that happens all around the world.

Economical incentives on here and now became more important than longterm investments in youth and education. Young people are now just digits in statistics of how many of them travel abroad, how many get a scholarship, how

more or less than 100 meters of a new highway? Is a training implemented by a youth NGO on intercultural communication worth more or less than a new train? Is a one-in-a-lifetime opportunity for a disabled child to travel abroad and meet his peers more or less valuable than a new tractor for a farmer?

Measurements are good, as statistics taught us, but only as long as outcomes are comparable. Wherever such a reliable comparison is impossible one should abandon the idea of comparing it in absolute numbers. Because how can we collate one euro invested in education or youth with the same euro invested in infrastructure? We have to strive and fight for programmes that will support not only quantitative outcomes but above all qualitative, these programmes should stimulate development of young people

rationalisation and measuring everything the European Commission changed its expectations towards its programmes for education and youth. What could not have been changed within the current programmes, has been changed in the new multiannual financial framework which will be implemented between 2014 and 2020.

In November last year the European Commission presented a proposal for the new generation of the programmes.

Or maybe it would be more accurate to call it The Programme ever since then.

many trainings, how many researches‌ Values and being an active member of the society stopped being important. We cannot measure it. The European Commission proposed a programme which in principle puts accountability and measurement over perspectives. And what is even worse is the fact that very few people tend to disagree with that strive for numbers, for converting everything and everybody into digits.

But if this is the trend, if at any point we, young Europeans, have to be measured, I am asking: is my education worth

to make out of them future leaders. And this is not always that easy to count.

Miroslaw comes from Poland and currently studying European Studies in Maastricht in the Netherlands. For the past 5 years He has been working for European Students Forum AEGEE, where last year he joined the European Board of Directors as the Vice-President. His particular interests is on higher education and youth policies in the European Union.

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corporate responsibility

Ignorance ain’t bliss:

It’s time to recognise the impact of the environment and climate on health People’s health and well-being are affected by various factors, including behaviour, genetic makeup, demographic elements such as age, gender and population sub-group, and increasingly by the environment and changing climate.

By Annika Ahtonen*

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R

educing Europe’s greenhouse gas emissions by 20% by 2020 would lead to health savings worth €52 billion annually, according to estimates by the Health and Environment Alliance and Health Care Without Harm Europe.

Thus not only are there personal reasons to value and promote health as a key component of well-being, it is also in the interests of the public purse and authorities. However, when we look at the interlinkages between the environment, climate and health, it is obvious that much more should be done to reduce and prepare for unwanted health consequences.

Disruptions to our environment, often as a result of our own actions, are affecting basic elements of our well-being. Air pollution is a good example. European Environment Agency (EEA) data shows that 12 EU member states exceeded national emission levels in 2010. This is mainly due to road transport, which is a significant source of air pollutants, namely nitrogen oxides. Not only do emissions

contribute to climate change, but they also have more short-term consequences: causing people respiratory problems, contributing to acidification of soil and surface water, and damaging vegetation.

Add to the picture potential environmental and climatic risks deriving from climate change such as floods, droughts, storms, changes in local air quality, heat waves, fires and increased UV radiation, and it becomes clear that the impact on people’s health will only grow.

Extreme heat increases levels of air pollution, which causes cardiovascular and respiratory diseases that can be deadly especially among elderly people, as seen in Europe during heat waves in 2003.

Extreme weather events damage homes and medical facilities, and may put unbearable strain on health systems. Global warming is expected to affect distribution of infectious diseases such as malaria. Changing rainfall patterns affect agriculture and freshwater supplies, and thus affect the key elements of our wellbeing: food and water.

We can no longer close our eyes to the fact that our surrounding environment and climatic changes have an enormous impact on our well-being. To stay healthy, promote health and well-being, prevent diseases, and treat and care for people, we need healthier environments and we need to prepare for current and future effects of climate change. We need to mitigate our impact on the en-

corporate responsibility

vironment by reducing our greenhouse gas emissions and adapting our societies, including infrastructures and health systems, to extreme weather events, environmental disasters and changing weather and environmental conditions.

The EU recognises the importance of mitigation efforts and has set itself ambitious energy and climate change objectives for 2020, known as the 20/20/20 targets. These are reducing greenhouse gas emissions by 20%, improving energy efficiency by 20% and increasing the share of renewable energy in the EU’s energy mix to 20%. These goals have been incorporated into the ‘Europe 2020’ strategy for smart, sustainable and inclusive growth and its flagship initiative ‘Resource-efficient Europe’.

However, the EU is not set to meet these targets. To boost member states’ interest in meeting these targets, more discussion on the direct and indirect short- and medium-term benefits for Europe is clearly necessary. Health benefits are a perfect

example. In addition to the direct health savings from reducing greenhouse gas emissions and air pollution, mentioned earlier, indirect health-related benefits can be seen across society. Designing greener cities that support more active lifestyles and promote new attitudes to transport would encourage healthier lifestyles and reduce cardiovascular and other chronic diseases. Healthier environments can increase the number of healthy life years, reduce hospital admissions and use of medication, and thus make enormous savings in public health expenditure. With ageing populations and the economic crisis pressuring public budgets, it is in Europe’s self-interest to promote health and healthier environments. Triggering public debate on the health-related costs of environmental and climatic change in Europe would help to make health considerations an integral part of the rationale for creating greener and more sustainable economies.

Health services themselves must also

‘green’ their services. As major employers, landowners and consumers, health services can play a significant role in reducing their own greenhouse gas emissions. Managing energy, buildings, transport and waste, and developing green environments, would have a positive impact on the environment and climate, and help to save money and promote health.

However, not even the best mitigation efforts can prevent the heat waves or floods which already affect us today and which are likely to increase due to climate change. Europe must do more to reduce such damage to society, including its health effects. EU work on adaptation has begun, albeit slowly. The European Commission’s White Paper on ‘Adapting to climate change: towards a European framework for action’, and a sectoral paper on health, were published in 2009. These will be followed by an Adaptation Strategy, expected to be published in 2013.

To prepare and protect Europeans from EUROPEANBUSINESSREVIEW

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new infectious diseases and increased respiratory diseases, cancers and other climate change-related health effects, action will be needed across borders and at different levels of society. It is useful to bear in mind that adaptation measures often do not require significant investment. Running awareness campaigns, training medical staff and putting in place warning systems and preparedness plans would represent a significant and cost-effective basis for action.

As health systems play a central role in dealing with the health-related consequences of extreme weather events, environmental disasters and changing weather and environmental conditions, the systems must improve their preparedness and response capacity. They should conduct risk assessments and outline priorities for action should climate-related health problems threaten populations or the health facilities themselves. Ensuring that health systems continue to deliver without disruptions to supplies of clean water, energy and food must be the basis of any preparedness plan.

Planning ahead rather than paying for consequences later also makes sense in

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other sectors and policy areas. This means improving urban planning, together with energy and transport systems, so that they not only promote low-carbon, environmentally-friendly and healthier economies, but also take into account projected climatic and environmental changes for health. Examples of action range from energy-efficient cooling facilities and solar shading to flood defences and grey water storage for recycling water. While member states and regions will be responsible for adaptation measures, the EU can play an important role with regard to protecting health by sharing knowledge, experiences and lessons earned; promoting cross-border co-operation on research, infrastructure projects and developing preparedness plans; assessing the impact of climate change on health, and ensuring that both its mitigation and adaptation policies help to promote public health.

Despite being central to our well-being, health considerations are often treated as a separate policy issue. This is no longer sustainable. Our surrounding environ-

ment and climate change can affect people’s health, and consequently society and the economy as a whole. Thus the EU and its member states must take seriously the inter-linkages between the environment, the climate and health. Europe must promote healthier environments by reducing greenhouse gas emissions and adapting to current and potential impacts of climate change. By protecting and promoting health, Europe can take a major step towards tackling the economic and ecological crises it is facing. *Annika Ahtonen is a Policy Analyst in the Europe’s Political Economy Programme of the European Policy Centre.

This commentary builds on the EPC Issue Paper ‘Green growth: making ecoefficiency a driver for growth’ and on the work of the EPC-KBF Climate Change Adaptation Task Force, the results of which will be published in the summer of 2012.

It was published on the occasion of the conference ‘Human health and the impact of environmental and climatic factors’, held in Copenhagen on 25 April 2012.

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artwork

Art was not created to be evaluated ...a few words with Nelly Rapti, artist Art was not created to be evaluated, but to inspire, sensitize and revitalize.

Therefore, it is addressed to all, both connoisseurs and the ignorants. The result is that everyone interprets Art in their own language.

“Nelly Rapti’s work stands 64

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out, as her sensitivity and strenght of feeling can be seen everywhere in her work.

The emotionally charged and sensitive artist Nelly Rapti, expresses herself in various forms, using with the same comfort watercolors, oils, inks, pastels, charcoal and other materials.

Directly influenced by her mentality, people and nature, her subjects are those of a direct and realistic painting. Her insight to the world is totally appropriate: sometimes ecstatic and other times tender and soft.”

Themis Liveriadis

artwork

Are you satisfied with your life?

What inspires you?

Yes, I am. I have definitely been loved in my life both personally and professionally.

Lots of things. On the one hand, my main source of inspiration derives from Athens –my beloved city. I was born and bred in Athens and this ancient city plays a very important role in my art. My daily Routes all over the maze –called Athens– provide me with an infinite variety of ideas which then are presented in my work.

How could you describe your art?

My art is the mirror of my soul. It depicts my feelings: my happiness, anxiety, dreams and above all fulfillment.

How could you describe your life so far?

I have had a great life rich in experiences. Hopefully, there is more to come and everything will be seen in my work as it always happens.

On the other hand, human contact is also of great importance to me. Both unknown people and my closest and dearest may provide me with something which will lead to the realization of a picture.

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last page

The Future of History

Can Liberal Democracy Survive the Decline of the Middle Class?

Stagnating wages and growing inequality will soon threaten the stability of con¬temporary liberal democracies and dethrone democratic ideology as it is now understood. What is needed is a new populist ideology that offers a realistic path to healthy middle-class societies and robust democracies.

S

omething strange is going on in the world today. The global financial crisis that began in 2008 and the ongoing crisis of the euro are both products of the model of lightly regulated financial capitalism that emerged over the past three decades. Yet despite widespread anger at Wall Street bailouts, there has been no great upsurge of left-wing American populism in response. It is conceivable that the Occupy Wall Street movement will gain traction, but the most dynamic recent populist movement to date has been the right-wing Tea Party, whose main target is the regulatory state that seeks to protect ordinary people from financial speculators. Something similar is true in Europe as well, where the left is anemic and right-wing populist parties are on the move.

There are several reasons for this lack of left-wing mobilization, but chief among them is a failure in the realm of ideas.

For the past generation, the ideological high ground on economic issues has been held by a libertarian right. The left

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has not been able to make a plausible case for an agenda other than a return to an unaffordable form of old-fashioned social democracy. This absence of a plausible progressive counter-narrative is unhealthy, because competition is good for intellectual -debate just as it is for economic activity. And serious intellectual debate is urgently needed, since the current form of globalized capitalism is eroding the middle-class social base on which liberal democracy rests.

By Francis Fukuyama*

The Democratic wave

Social forces and conditions do not simply “determine” ideologies, as Karl Marx once maintained, but ideas do not become powerful unless they speak to the concerns of large numbers of ordinary people. Liberal democracy is the default ideology around much of the world today in part because it responds to and is facilitated by certain socioeconomic structures. Changes in those structures may have ideological consequences, just as ideological changes may have socioeconomic consequences...

*Francis Fukuyama is a Senior Fellow at the Center on Democracy, Development and the Rule of Law at Stanford University.Before that he served as a professor and director of the International Development program at the School of Advanced International Studies of the Johns Hopkins University.

He is best known for his book The End of History and the Last Man (1992).

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